HCOS2350 - Registered Dealers in Controlled Oils (RDCO): basic checks
The basic checks are essential to establish the normal business practice. It gives you the opportunity to question anything outside the norm uncovered during the visit. The checks should take into account the size and type of RDCO visited. When the RDCO activity is a secondary part of the business (eg plant hire, train companies) not all the checks will be relevant.
Always ensure you interview a responsible person, preferably the person who has control of the business.
Always assume that the trader is honest and compliant unless proved otherwise. Remember that we need the support and co-operation of the honest traders for the RDCO scheme to work.
On a first assurance visit, the following basic checks should be undertaken:
- Check that all approval details are correct.
- If it is a limited company, check the certificate of incorporation.
- Obtain details of all partners or company directors.
- Establish the size and structure of the business including PPOB, other sites, branches, associated businesses, subsidiary business activities, the level of sales in containers of 20 litres or less and how they are dealt with.
- Establish the types and quantities of oil dealt in.
- Establish who the principal customers and suppliers are.
- Does the distributor use other RDCOs to supply to their customers (ie act as a dry broker)? Are there agreements or arrangements in place for the deliverer of the oil to notify any suspicious circumstances (see section 12 of Notice 192)?
- Does the distributor deliver on behalf of a dry broker? Do they report suspicions to the supplying RDCO?
- Establish what checks the trader makes to ensure the legitimacy of supplies of rebated oil they make.
- Establish what checks the trader makes on new customers, eg relating to declared use of the oil, methods of payment, credit worthiness. Ask for details of any potential customers who failed any of the checks and were refused.
- Establish the pricing policy and mark up / margin.
- Establish what storage arrangements and stock control system the trader has, and what stock records they maintain.
- Establish the delivery arrangements.
- Obtain details of all delivery vehicles operated by the business.
- Establish the procedures and records maintained for dealing with any yard sales.
- Establish the trader's procedures for dealing with cash customers.
- Establish whether or not there have been any sales where the trader has had suspicions about the customer. Were the suspicions reported, and to whom? Have they any customers who move address regularly? Have any customers 'gone missing' between buying the oil and the invoice being issued?
- Inspect the premises.
- Are the premises consistent with the declared activities?
- What happens where and who is responsible?
- What types and quantities of fuel are normally held?
- Ask the trader to demonstrate current levels of stock held for all types of fuel. The RDCO can do this by lifting the lids on surface tanks or by accessing underground tanks to carry out a physical 'dip' of the tank. You should be able to observe these operations.
- Review the number of pumps on the site(s) against the approval application or EXIT465A.
- Are the rebated oil pumps marked 'Not to be used as road fuel' in accordance with Regulation 12 of the Hydrocarbon Oil (Marking) Regulations 2002?
- Does the trader issue delivery notes to recipients of oil with the statement 'Not to be used as road fuel' in accordance with Regulation 13 of the Hydrocarbon Oil (Marking) Regulations 2002?
You should record all relevant information and include on or attach to the EXIT465A.
During subsequent assurance visits you should review this information. If there have been any changes which require amendments to the approval (eg changes to the legal entity, changes in the storage premises, changes in the type of oil dealt in, starting to import or export rebated oils), the trader must give formal notification in writing. Either obtain a letter on the visit, or advise the trader to write to the Mineral Oil Reliefs Centre (MORC) in Newcastle with details of the changes. It is essential that trader information is kept up to date to ensure the correct risk ranking on the Delphi system, or on any other system being used to target according to risk.
RDCOs supplying fuel used in private pleasure craft or for private pleasure-flying - additional basic checks
- check that the duty on sales of red diesel for use in pleasure craft is recorded, paid to HMRC and that any rate changes have been correctly calculated and introduced
- check that the purchaser declarations for sales of red diesel to private pleasure craft and for sales of Avtur for private pleasure-flying are retained
- check whether or not records are being noted:
- if a purchaser of red diesel insists it is for commercial use but the supplier thinks otherwise, or if the purchaser is claiming 100% domestic use
- if a purchaser of avtur declines to make a declaration but the fuel may be used for private pleasure purposes
and consider whether or not any further follow up action is appropriate.