Who is likely to be affected?
1. Businesses producing and importing hydrocarbon oils and alternative fuel products.
General description of the measure
2. Legislation will be introduced in Finance Bills 2008, 2009 and 2010 to amend the duty rates for hydrocarbon oils and reduce the number of rates for heavy oils and light oils.
Operative date
3. The simplification changes and the introduction of a rebated rate for biodiesel and bioblend will have effect on and after 1 April 2008. The 2008 rates changes will have effect on and after 1 October 2008. The 2009 changes will have effect on and after 1 April 2009. The 2010 changes will have effect on and after 1 April 2010.
Current law and proposed revisions
4. On and after 1 April 2008, the three existing duty rates for heavy oil (diesel) will be reduced to one (heavy oil). On and after 1 October 2008, this rate will increase by 2 pence per litre. On and after 1 April 2009, this rate will be further increased by 1.84 ppl, and on and after 1 April 2010, by 0.5ppl above indexation in that year.
| Duty rate per litre (£) | ||||
| Heavy oil | Current | On and after 1 April 2008 | On and after 1 October 2008 | On and after 1 April 2009 |
| Heavy oil which is not Ultra low sulphur diesel (ULSD) or Sulphur-free diesel (SFD), i.e. conventional diesel | 0.5694 | 0.5035 | 0.5235 | 0.5419 |
| ULSD | 0.5035 | |||
| SFD | 0.5035 | |||
5. On and after 1 April 2008, the four existing duty rates for light oil (petrol) will be reduced to two (unleaded petrol and leaded petrol). On and after 1 October 2008, the unleaded petrol rate will increase by 2 pence per litre. On and after 1 April 2009, it will be further increased by 1.84 ppl, and on and after 1 April 2010 by 0.5ppl above indexation in that year.
| Unleaded petrol | Current rate per litre (£) | Duty rate per litre (£) on and after 1 April 2008 | Duty rate per litre (£) on and after 1 October 2008 | Duty rate per litre (£) on and after 1 April 2009 |
| Unleaded petrol (that is not Ultra low sulphur petrol (ULSP) or Sulphur-free petrol (SFP)) | 0.5365 | 0.5035 | 0.5235 | 0.5419 |
| ULSP | 0.5035 | |||
| SFP | 0.5035 |
6. On and after 1 October 2008, the duty rate for leaded petrol will increase by 2 ppl.
| Leaded petrol | Current rate per litre (£) | Duty rate per litre (£) on and after 1 October 2008 |
| Light oil (other than unleaded petrol) | 0.6007 | 0.6207 |
7. The duty rate for aviation gasoline (AVGAS) is half that of the light oil (other than unleaded petrol) rate. On and after 1 November 2008 a new fiscal definition of AVGAS will be introduced and the rate will be made freestanding at the 1 October level.
| Current duty rate per litre (£) | Duty rate per litre (£) from 1 October 2008 | |
| AVGAS | 0.3003 | 0.3103 |
8. On and after 1 October 2008, on and after 1 April 2009 and on and after 1 April 2010, effective rates of duty (that is, the relevant duty minus the relevant rebate) for non-road fuels will be increased by the same percentage as main road fuels.
| Rebated oils | Current effective duty rate per litre (£) | Effective duty rate per litre (£) on and after 1 October 2008 | Effective duty rate per litre (£) on and after 1 April 2009 |
| Light oil delivered to an approved person for use as furnace fuel | 0.0929 | 0.0966 | 0.1000 |
| Marked gas oil | 0.0969 | 0.1007 | 0.1042 |
| Fuel oil | 0.0929 | 0.0966 | 0.1000 |
| Kerosene to be used as motor fuel off-road or inan excepted vehicle | 0.0969 | 0.1007 | 0.1042 |
9. The current duty differential of 20 ppl for biofuels for road use will cease from 2010 and duty will thereafter be charged at the same rate as main road fuels.
| Biofuels | Current duty rate per litre (£) | Duty rate per litre (£) on and after 1 October 2008 | Duty rate per litre (£) on and after 1 April 2009 |
| Biodiesel | 0.3035 | 0.3235 | 0.3419 |
| Bioethanol | 0.3035 | 0.3235 | 0.3419 |
10. On and after 1 April 2008, a new rebated rate of duty will be introduced on biodiesel and bioblend used other than as fuel for road vehicles. On and after 1 October 2008, this rate will be increased by the same percentage as main road fuels. The existing repayment mechanism in relation to the use of unblended biodiesel in off-road applications will come to an end. In the case of bioblend produced with kerosene for heating use, a nil rate of duty will have effect.
| Rebated biodiesel and bioblend | Current effective duty rate per litre (£) | Effective duty rate per litre (£) on and after 1 April 2008 | Effective duty rate per litre (£) on and after 1 October 2008 |
| Biodiesel for non-road use | 0.0313 | 0.0969 | 0.1007 |
| Biodiesel blended with gas oil | 0.5694 | 0.0969 | 0.1007 |
| Biodiesel blended with kerosene | 0.5694 | Nil | Nil |
11. The duty rate for natural gas will increase to maintain the differential with main road fuels in pence per litre equivalents up to 2010-11. The duty rate for liquefied petroleum gas will increase to reduce the differential with main road fuels by the equivalent of 1 penny on litre of petrol up to 2010-11, in line with the alternative fuels framework.
| Road fuel gases | Current effective rate per kg (£) | Duty rate per kg (£) on and after 1 October 2008 | Duty rate per kg (£) on and after 1 April 2009 |
| Natural gas (NG), including biogas | 0.1370 | 0.1660 | 0.1926 |
| Road fuel gas other than natural gas - eg liquefied petroleum gas (LPG) | 0.1649 | 0.2077 | 0.2482 |
12. The duty differential applicable to biogas, equivalent to 40.88 pence on a litre of petrol, will remain at least at its current level until Budget 2012.
13. The Hydrocarbon Oil Duties Act 1979 will be amended by Finance Bill 2008 to implement those changes to have effect on and after 1 April 2008.
Further advice
14. If you have any questions about this change, please contact the National Advice Service on 0845 010 9000. Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk