HCOTEG12780 – Excise Duty on Oils (Duty Liability): Rebated oils (for off- road and other qualifying uses)

Unmarked Heavy oil, including DERV and road fuel extenders, unmarked kerosene or unmarked gas oil attracts the full (un-rebated) rate of excise duty, at the time of writing ** £0.5694p per litre. Ultra Low Sulphur Diesel (ULSD) and Sulphur Free Diesel (SFD) are charged at a lower rate £0.5035p per litre.

Oil not to be used as a road fuel, which is put to off-road use or to other qualifying uses, attracts a rebate of duty, which when applied to the full rate for the oil creates effectively a new lower rate of excise duty.

The Hydrocarbon Oil Duties Act 1979 – Schedule 1 as amended, gives details of those vehicles which are accepted as being ‘ Excepted Vehicles’ and which are entitled to use marked rebated oils for off-road use, provided that these are put to eligible use.

The Finance Act 2006 introduced legislation amending section 27 of the Hydrocarbon Oil Duties Act, 1979 (HODA) to enable Schedule 1 of HODA to be amended by Treasury Order. N.B. Changes were made to the Schedule with effect from 1 April 2007.

(For further information on ‘Excepted Vehicles’ please see the HMRCs Internet site).

A new concession for vintage tractor owners who purchase kerosene for the production of Tractor Vaporising Oil has also been granted, which allows them to mix rebated kerosene (MKO) with other road fuels for use in vintage tractors constructed before 1960.

(For further information on this concession, please see the department’s internet site).

Light Oil Furnace Fuel (LOFF) which would attract a full (un-rebated) excise duty rate of £0.6007p per litre if used as a road fuel, attracts a rebate of £0.5078p per litre, reducing the duty to £0.0929p per litre when it is used in boilers and furnaces as a heating fuel.

Because many of the oils which are supplied ‘rebated’ can be used either as a road fuel or as an road fuel extender, most types of rebated fuel is marked and/or dyed as evidence that this has been supplied at a reduced rate of duty, either for off-road or for other eligible use.

Rebated oils include Marked Kerosene (MKO) that is normally used as domestic heating oil but may be used as a motor fuel ‘off road’ or in an excepted vehicle, Marked Gas Oil (MGO) also known as ‘Red Diesel’ and Marked Ultra Low Sulphur Diesel. The full duty rate for Heavy Oils is £0.5694p per litre and the duty rate for ULSD is £0.5035p per litre.

Marked Gas Oil attracts a rebate, which reduces its effective excise duty to £0.0969p per litre, when the oil is put to a qualifying use.

Marked Kerosene attracts a full rebate of £0.5649p per litres, making the effective duty rate – Nil.

Aviation Turbine Fuel (AVTUR) is a high specification kerosene, which is also supplied rebated but unmarked for aircraft use, it attracts a rebate of £0.5694p per litre, making the effective duty rate – Nil.

Heavy Fuel Oil which would attract the full (un-rebated) heavy oil duty rate of £0.5694p per litre if used as a road fuel, attracts a rebate of £0.4765p per litre, giving it an effective excise duty rate of £0.0929p per litre when it is used as a heating fuel.

Marked rebated mineral oils remain controlled beyond the duty point until they have been supplied and put to eligible use, under the Registered Dealer in Controlled Oil* (RDCO) scheme, this is because there is an incentive to misuse them as a road fuel (MGO or ‘Red’ Diesel) or as a road fuel additive or extender (kerosene) due to the difference between the un- rebated and rebated duty rates involved. To counter this risk the department implemented the Oils Strategy, which is aimed at reducing and controlling the volumes of marked rebated mineral oils diverted to illegal road fuel use.

* A Guided Learning Unit on the ‘RDCO Scheme’ Reference 003202 is now available in Online Learning).

** Details of the current rates of excise duty can be found on HMRC’s Internet site at www.hmrc.gov.uk