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HM Revenue and Customs Brief 56/08


HM Revenue and Customs -Tax Authorities

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Issued 5 December 2008

Marine fuels and marine voyages excise duty relief - proposed consultation exercise

Purpose of this brief

Following a review of the treatment of marine fuels, we wish to advise the industry of our intention to undertake a consultation exercise, with a view to changing the legislation and guidance, and to confirm the current procedures which should have been followed by suppliers of these fuels.

Particular emphasis is placed on the correct procedure which should have been followed when excise duty is dealt with under the 'netting' procedures.


The review has drawn to our attention the fact that the procedures for supplying marine fuels under the netting arrangements are not being applied consistently across the industry. This is having a distortive effect on the supply chain and has led to complaints of unequal treatment. There are other changes that we would like to make, including a number of other practices that have resulted from individual interpretation of the guidance, which also need to be addressed by improving the guidance that we issue.

Current procedures

In respect of marine fuels, relief from excise duty is available on heavy oil and light oil which are used as fuel for the machinery of eligible vessels during a marine voyage ('eligible vessel' and 'marine voyage' are defined in Public Notice 263 section 2.1 and section 2.3 respectively).

Relief is obtained by using:

  • Duty-free heavy oil delivered direct to the vessel from a duty-suspended mineral oil installation.
  • Duty-paid light or heavy oil on which repayment is claimed using form HO 50 (claims can be made by the owner, commercial charterer or hirer or the ship's master, a sole agent, or a supplier of the oil acting as sole agent).
  • Duty-paid light or heavy oil supplied at a duty-exclusive price by an approved duty-deferment trader who is also approved for netting. Supplies must be delivered direct from a warehouse or refinery to the ship that will be engaged on a marine voyage by the approved person (duty deferment holder or their agent).

The netting procedure restricts the relief to 'direct deliveries' only. The following delivery examples are therefore not acceptable under the current netting arrangements:

  • Deliveries to land based storage tanks/locations for onward delivery to eligible vessels engaged on marine voyages. This would not preclude deliveries to an authorised Export Warehouse where the product would move under the W8 procedure.
  • Deliveries to eligible vessels engaged on marine voyages where fuel is sold to a third party prior to delivery at the ship's flange.
  • Where a third party collects the fuel in their own transport from the refinery or warehouse.

Future treatment/implementation

We are aware that different interpretations of the regulations surrounding these procedures may have led businesses to set up systems based on incorrect application of our policy. The recommendations on which we intend to consult will address these issues along with others relating to the supply of marine fuels.

One recommendation concerns the issue of netting. Currently, netting is not appropriate where marine fuel is purchased by and delivered to an intermediary (third party who takes title) who then delivers the oil to a ship. In this situation the intermediary is required to buy the oil at a duty-inclusive price and sell it on at a duty-inclusive price, and the ship owner or other qualified claimant is entitled to repayment of duty under the Marine Voyages Relief (MVR) Regulations.

Our consultation proposes that this situation could be addressed by extending the netting arrangements to allow an approved person (deferment holder) to supply marine fuel, at a duty-exclusive price, to an intermediary. This third party would also be able to supply at a duty-exclusive price, whether or not they take title to the oil. This would be dependent on the intermediary delivering the oil directly to a ship and providing the necessary supporting evidence of delivery to the ship to the duty deferment holder.

As the current irregularities have been tolerated for a number of years, it is our intention to allow a period of grace before requiring businesses to amend their procedures in line with the results of our consultation. This period of grace will run at least up until the publication of the consultation findings.

The consultation document will be issued shortly via our website and we welcome your responses.

About the Author

Crown Copyright 2008.

A licence is need to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are updated regularly and may be out of date at time of reading.

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Article Published/Sorted/Amended on Scopulus 2008-12-11 21:58:48 in Tax Articles

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