Select Committee on Northern Ireland Affairs Minutes of Evidence



  1. Section 12 of the 1979 Act provides that the rebated rate is not allowed on fuel for road vehicles and section 24A that marked oil shall not be used as fuel for a road vehicle.

  2. Sections 13 and 24A of the Hydrocarbon Oils Duty Act 1979 Act set out the penalties for the misuse of rebated heavy oil. This includes civil penalties under section 9 of the Finance Act 1994 and recovery of the rebate underpaid at the time of the contravention. In more serious cases involving intent, a person would be liable on summary conviction to more severe penalties including up to six months imprisonment or on conviction on indictment to a penalty of any amount or up to seven years imprisonment. Offending vehicles are also liable to forfeiture.


  3. Section 24 of the 1979 Act makes provision for the control of rebated oil. It allows the Commissioners of Customs and Excise to make regulations in respect of section 12 inter alia.

  4. The relevant regulations are the Hydrocarbon Oil Regulations 1973 (SI 1973/1311). Regulations 17 to 30A therein deal with the marking of oil for rebate and the effect is to allow Customs to differentiate between diesel for road use which is unmarked and diesel, or red diesel as it is commonly known, for use off-road which is marked.


  5. There are both chemical and colouring markers prescribed for gas oil in the Regulations. The chemical markers are either:

    —  1,4-dihydroxyanthraquinone added in the proportion of not less than 1.75 kilograms per 1,000,000 litres of oil, or

    —  4-(N-ethyl-2-(1-isobutoxyethoxy)ethylamino)azobenzene added in the proportion of not less than 5 kilograms per 1,000,000 litres of oil. In practice this particular marker is not used.

  6. The colouring marker is CI Solvent Red 24 added in the proportion of not less than 4 kilograms per 1,000,000 litres of oil. It is this colouring substance that gives rise to the term "red diesel".


  7. For kerosene there is only a chemical marker. This is coumarin and it is added in the proportion of not less than 2 kilograms per 1,000,000 litres of oil. Historically colouring has not been required because this would have conflicted with the marketing of some kerosene products as heating oils, Aladdin Pink and Esso Blue for example. That reason has less validity with the passing of time but the question of adding a colouring marker to kerosene will be left until the introduction of a "euromarker". The Commission is currently working on this.

  8. It is these chemical and colouring markers that allow Customs and Excise to determine on testing whether the fuel in question was delivered at the full rate of duty or the rebated rate, and to differentiate between gas oil and kerosene. Thus a vehicle using rebated fuel for road use would be in contravention of section 12 or 24 of the 1979 Act.


  9. There are two Council Directives that have an impact on mineral oils. Council Directive 92/81/EEC on the harmonisation of excise duties on mineral oils and Council Directive 92/82/EEC on the approximation of the rates of excise duties on minerals oils, including diesel, gas oil and kerosene.

  10. Directive 92/81/EEC provides that mineral oils will be subject to excise duty if intended for use, offered for sale or used as heating oil or motor fuel. (This means motor in the broadest sense, not necessarily just vehicle motors). Mineral oils are defined according to the Customs Nomenclature. The Directive goes further in stating that Member States shall exempt mineral oils used for purposes other than as motor fuel or as heating oil. Most importantly, it also provides that Member States can apply total or partial reductions in duty rates to mineral oils used:

    —  in the process of producing electricity;

    —  for navigation in inland waterways;

    —  in the field of passenger transport and the carriage of goods by rail;

    —  in some specified pilot projects;

    —  in the field of manufacture, development, testing and maintenance of aircraft and ships;

    —  in agricultural, horticultural, forestry and inland fisheries;

    —  in respect of dredging operations in navigable waterways and in ports.

  11. Specific provision is also made for a reduced rate for gas oil, so long as it is not less than the minimum rate (ECU 18 per 1,000 litres), for stationary motors, plant and machinery used in construction, civil engineering and public works and for vehicles intended for use off the public roadway. The UK gas oil rate of 2.58 pence per litre is greater than ECU 18 per 1,000 litres.

  12. Provision is also made in Directive 92/82/EEC for a nil rate of duty on kerosene used for heating purposes.

  13. So the provisions of the Directives in respect of gas oil and kerosene closely mirror those of the UK legislation.

  14. The impact of this Directive on the choice of duty structure in the Republic of Ireland also has some bearing on the availability and pricing of diesel in Northern Ireland, particularly when there is a market variation in the respective exchange rates. For comparison purposes, the retail prices of derv and gas oil in Northern Ireland and the Republic are as follows (adjusted for exchange rate):
At 15 September 1997

Pence per litre

DervGas oil

Northern Ireland64.92 14.38
Republic of Ireland53.46 19.19

29 September 1997

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Prepared 29 July 1999