ANNEX A |
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
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
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
in the proportion of not less than 1.75 kilograms per 1,000,000
litres of oil, or
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
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
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
|Republic of Ireland||53.46
29 September 1997