View Full Version : Commercial Use of Red Diesel - an absurdity
It seems that the use of red for commercial users is not under threat - many large boats are coded and available for charter - so lets take such a boat with say 20% private use and 80% charter use - what fuel pump would be used if red is stopped for pleasure boaters but not for commercial users?
Is it not absurd that a rib taking say 14 passengers around the coast on pleasure trips is commercial hence can use red - a charter boat taking executives for a ride is commercial and can use red but the same boat being used for your own pleasure would not be able to use red? What do you do - suck the red out and replace with white diesel?
Even a narrow definition of commercial as just say 'fishing' can be difficult - a charter boat that allows some fishing is surely a fishing boat? A boat taking out 6 anglers pleasure fishing for the day would surely be commercial.
So has anyone any idea how red will be protected for 'commercial vessels' - in other words what is a commercial vessel? How will those who dispense the fuel know what is commercial and what is not?
It seems totally absurd to claim that the rich have been hit when in practice an 80 foot charter boat at £7k per day uses red whilst a 25 foot power boat is banned from using it.
Whitelighter
18-09-05, 22:44
Iwould imagine that all vessels would use white diesel, regardless of their activity. The 'over tax' paid on the white diesel would then be claimed back through operating taxes.
I.e. a fishing vessel that is 100% commercial can claim the appropriate tax relief on 100% of diesel used. Your example of a large MoBo which is used for charter work 80% of the time can only claim relief on 80% of fuel used in the year.
Either that, or a direct % against profits made from the commercial activity. In a way, this make more sense, as if the Red is not available anywhere, it cannot be used for other vehicles such as cars and vans.
If that were to come in into effect, then one can envisage a loophole being created.
Something on the lines of, you would charter your boat from a company you are a director of, or set it up in a pension fund if next years rules allow it. You would pay the comapny to hire the boat at a nominal fee, the company includes fuel in its price and thus, they claim back the refund. Messy but possibly worth a bit more thought.
The whole thing is a real mess and if the government has any sense they will leave well alone.
Take the issue of heating fuel used in your average eberspacher/webasto...
If red diesel is abolished for marine use, then what about heating issues...you can legally use red at home for your oil fired heating, so why penalise the average boatowner/livaboard...it's domestic fuel.
I doubt whether fitting separate tanks is viable in the majority of boats, but hey if you did, how would they know which fuel was being used for main engines.
So the government would have to abolish domestic heating oil entirely for any ban on marine diesel to be effective.
Another issue is that of older marine engines such as the Perkins amongst others.
These are specifically designed to run on red diesel or even heavier heating oil.
They will not run well on modern Road diesel because it is thinner and has less lubricating properties. This is because they were originally designed as generating and agricultural engines, specificially to use heavier diesel oils.
So every 50 hours or less I would have to be changing the lift pump and metering unit seals...not a job that can be done at sea in an emergency, so has significant safety aspects.
Perkins would have, I understand, no plans to modify the seals for the older engines as the market is just not big enough...so we're stuck on that one, or we will be ..big time if mgo/red goes.
Add these to the logistic and distribution issues, the absurdity of the commecial issues, which allow people to run leisure boats that are commercial in name only, and the grossly unfair situation that would bring about...then you have a recipe for
a complete mess in the marine world.
One thing is for sure...the fuel mustn't change. How they tax it is something else...but to change the fuel from red to derv would be a complete disaster.
Steve.
I reckon Jezbanks has got it right. This system operates as far as commercial road vehicles are concerned but just means a lot more paperwork for the office. The governmint have obviously worked out how much extra tax they are going to get so I doubt they will drop it now!
I agree that the goverment will probably not drop it but any reasonable calculation would show a fall in total tax revenue so I do not think the governemnt will be doing this to raise tax.
Jezbanks - that gets round the mwthod of collection - a claim back system. That would draw a lot more capital out of the supplier and the customer - in effect depositing a sum with the government but it could be made to work. In fact commercial boats now can claim back their petrol duty as well as the vat - even on red today.
However, it still means that you have tha abusdity of a charter boat going out on its executive entertainment trip on the equivalent of red, as is the small fishing boat taking out 6 anglers but the same boats being used to do the same pleasure things for yourself would be taxed to the hilt. Many large boats are coded charter boats. So pleasure for yourself is taxed the same pleasure that you hire is not taxed! That is absurd.
Whitelighter
19-09-05, 09:24
I completely agree with you, an trust me , I am nor a supporter or an implementer of this way of thinking - I meerly think it is a solution the government may have considered and it gets around the arguement originally posted in this thread.
On the second point, when have you ever known our government to be logical or fair - especially highwayman Brown?
No - I have never known logic to get in the way of using their powers to mess up an industry .... none of them, it seems, have ever had to run a business ... they seem to be dedicated politicians from university who can tell us how to run the world having never experienced it themselves.
I wish I did not agree with you but I do.
I think that the worst will happen on this issue - I do not think they have done other than pay lip service to the trade/consumer lobbying - after all it is now September and still no application for an extension .......
Scaramoosh
19-09-05, 13:40
Surely you are mixing up 2 different issues.
1) Derrogation of tax. Let it go, it means nothing at todays oil prices. What full harmonisation will require is that you cant sell fuel below the harmonised price accross the EU. I can't remember the exact number but its 20 something pence (23.2??) per litre. I don't believe any of us will worry if we have to pay say 30 pence / litre.
2) Road Tax DERV, this is where we should be fighting, tax marine fuel yes but not a road prices as the surface of the sea doesn't need retarmacing every few years.
So we can loose the derrogation and still pay say 30p per litre if the tax regime is sensible.
So what have all the boat owners with Perkins engines in Holland and Germany been running on all these years? /forums/images/graemlins/confused.gif
I spoke directly to perkins about changing from red diesel to ULS in older perkins engines...
'The lower sulphur content could be an issue with the seals in your injection pump.
The seal swell with low sulpur fuel is less which may cause leakage in your pump. It may be advisable to have the injection pump reworked and all the seals changed if red diesel is no longer available. '
So if you have been using white all the time you are ok, cos the seals are 'used' to it. Problem is us, who have been running red for years - then all of a sudden move over to ULS diesel.
Well thats not so bad, I can accept that I might have to get the pumps fixed as a one off but once fixed they will be OK.
But thats not the same as "steverow" was saying which was that it would be a permanent problem, one thing that is really getting me down is all these "Doom and Gloom" merchants.
Think i will check with perkins again, just to make sure - they certainly did not say you needed special seals or they wont last long.
There are two issues = one the collection method and that has been dealt with the other is the absurdity of the commercial exemptions.
If road fuel prices were the same as the rest of Europe and marine fuel was the same that is another story but that is not going to happen. Marine fuel may have its own tax band yes - we do not know yet but adding another 25p per litre tax to red is a significant increase in cost on top of an already rapidly escalating cost and that will have a major effect on power boating.
andy_wilson
19-09-05, 20:10
I don't think they are going to ban red diesel, only the tax break it enjoys.
If it goes ahead - they will to ban it use for non-commercial pleasure boats. Red itself would still be available for commercial use.
The option is to use red but put the full UK tax on it and allow the commercial users to claim back the duty. However, there would be little sense in this because there is no way of checking legal use - so it would be logical to have a new class of fuel or just white diesel for non-commercial pleasure boats. leaving red for commercial users only. Therefore Steverow's point is valid and red would in effect be banned for pleasure boats.
"The option is to use red but put the full UK tax on it and allow the commercial users to claim back the duty. However, there would be little sense in this because there is no way of checking legal use "
Gludy,
If they had a claim back system then they wouldnt have to check legal use, the hoops you would have to jump through to make a claim would identify you as a bon-fide user. I suspect they would make it almost impossible to make a claim - just like Customs do now when small businesses try to reclaim vat on petrol for delivery vans.
Copy invoices to charterers
Passage plan posted to MCA
Fuel Invoice
Ships log verified by port control/marina berthing master/customs/immigration
The opportunities for tying us up in knots are endless.
The mechanisum for this nightmare has alrready been implemented, buy over 100litres today and customs are informed of the boat name, owner name and address and home port.
But as many other posters have pointed out there is no logic or rationality in any of this, its a another example of the UK Government gold plating an EU directive.
set of oars anyone?
gasp work beckons!! (Kim sorry about useing foul language on the forum)
David
"The option is to use red but put the full UK tax on it and allow the commercial users to claim back the duty. However, there would be little sense in this because there is no way of checking legal use "
Gludy,
If they had a claim back system then they wouldnt have to check legal use, the hoops you would have to jump through to make a claim would identify you as a bon-fide user. I suspect they would make it almost impossible to make a claim - just like Customs do now when small businesses try to reclaim vat on petrol for delivery vans.
Copy invoices to charterers
Passage plan posted to MCA
Fuel Invoice
Ships log verified by port control/marina berthing master/customs/immigration
The opportunities for tying us up in knots are endless.
The mechanisum for this nightmare has alrready been implemented, buy over 100litres today and customs are informed of the boat name, owner name and address and home port.
But as many other posters have pointed out there is no logic or rationality in any of this, its a another example of the UK Government gold plating an EU directive.
set of oars anyone?
gasp work beckons!! (Kim, sorry about using foul language on the forum)
David
Hi
The following is the lowdown from Perkins themselves:-
regards
Mike
<span style="color:blue">
Red Diesel is the same as White diesel, a red dye is used to show it has been purchased for off highway use (ie less tax).
No Perkins marine engine has ever been designed to run on heating fuel oil, they will and people do use alternative oils but in doing so what ever savings are made using a cheaper fuel is offset by premature wear on engine componants and reduced engine life.
Your engine handbook will list all recommended fuel types.
Below is a copy of Perkins policy on fuel types.
Trust this assists
Kind Regards
Steve Butcher
Good fuel characteristics are essential for the efficient operation of fuel injection equipment and due to this directly affect the operation of the engines to which the equipment is fitted.
Totally Acceptable Fuel Types
N590 Diesel fuel types – Auto / C0 / C1 / C2 / C3 / C4
BS2869 Class A2
ASTM D 975-92 Class 1, 2 and 3 & special grade 3
( Note : where low sulphur or low aromatic fuels are used it is important that lubricity additives are used & the fuel is acceptable to the lubricity tests described above )
Fuel types that MAY lead to a reduced product life
ASTM D975-91 Class 1-1DA
JP7, MIL T38219 XF63
NATO F63
Fuel types that WILL lead to reduced product life ( Only acceptable if used with additives )
AVTUR FS11, NATO F34, JP8, MIL T83133, DEF STAN 91-87, DERD 2463,
AVCAT FS11, NATO F44, JP5, MIL T5624, DERD 2452, AVTOR,
NATO F35, JET A1, DEF STAN 91-91, DERD 2494
ACAT, NATO F43,
JET A ( ASTM D1655 )
ASTM D399 Kerosene
Fuel types NOT ACCEPTABLE with or without additives
AVTAG
AVTAG FS11, NATO F40, JP4, DERD 2545
JET B ( ASTM D1655 )
BS MA100
JIS K2203 No.2
Bio Fuels
Bio diesel - R.M.E. fuel can be used in Perkins direct injection diesel engines. However, the following conditions apply:
· The fuel must comply with DIN V 51606 (or other approved national standards as they evolve).
· It can only be used in mixtures of up to 5% RME in mineral oil diesel fuel. No mixture above 5% is acceptable, as this can result in filter blocking.
· Fuel storage must be to recommended standards, to avoid the absorption of water, and degradation. In any event, storage should not exceed 12 months. Fuel degradation, if allowed to occur, can result in the corrosion of metallic components, and the premature failure of seals.
· RME is a powerful solvent. Damage may occur if it comes into contact with paint work.
</span>
Ok
Does anyone know what you have to do now as a charter or fishing boat to claim back the fuel duty?
Its really a big brother world if Customs have to be informed of each sale of over 100 litres. Everything is being made very complicated and costly as directives are issued and laws passed without any real regard for the cost of implementation.
Yes but this is the point.
Look at the paragraph under the acceptable fuel types..ie EN590 ULSD or City diesel. "Lubricity Additives may be required"
We'll have to be bunging in two stroke oil perhaps??.
This is exactly what my Perkins Powerpart dealer was telling me last year that ULSD road derv will cause lubricating problems on the seals of the metering unit and possibly lift pump.
See this for the History of the 6 354
http://www.perkins.com/perkins/cda/artic...014952,00.html? (http://www.perkins.com/perkins/cda/articleDisplay/1,4094,7_2052_23162-23376_32_____7_10014952,00.html?)
Steve.
Paul and Apollo,
Several things here, HM Customs and Excise, bless them, started to gather information on WHO was buying red diesel in marinas over 1 year ago, by now they know who you are, what boat you own, where you live, what car you drive, how many litres you use, how much you pay, when you paid it where you went and what you did. yes it's **** and the British people pay tax to pay for "them" to do it to us - and try to tell us we're free!
Where I berth they diligently fill in forms for HMC every time I refuel. There is no privacy left in the UK, we are all subjected to covert scrutiny by "officialdom" many times per day such is their paranoid feeling of insecurity.
The term heating oil is misleading, and "red diesel" is confusing, see below a quote from a government web site that explains what "they" think red diesel it is - which of course is what matters here.
"
Heating Oils
Our contracts ensure that up to 300 million litres of heating oil is delivered each year to more than 5,000 addresses in the UK. The product range includes Gas Oil (also known as Red Diesel, Tractor Diesel, Red Derv and 35 Second Oil), Kerosene (also known as Burning Oil, RBO, 28 Second Oil and Kero), Medium Fuel Oil and Heavy Fuel Oil.
"
http://www.ogcbuyingsolutions.gov.uk/energy/services/services_procurement_product.asp
MOST houses that heat with oil use 28 sec oil, some use 35 sec - which is red diesel. Certainly the stuff I used to buy was red diesel, I paid 5% VAT, the same stuff bought from a marina would attract 17.5% VAT, take the dye out and put in a car - or a truck - you know the rest . . .
The point is that the mechanism to differentiate USE already exists, minds infinitely inferior to ours are at this moment plotting to determine under what conditions can the duty be waived – see the stuff I wrote previously for what might be going through those minds. (in between pictures of the teletubbies and another game of solitaire)
Sadly after 50ish years on this planet I think I understand how government works, the outcome of this process will I think be cumbersome and punitive fanatically enforced with draconian zeal – rule Britannia yeah yeah
Cheers
David
I think it very likely that the government will want to abolish all forms of low tax gasoil ASAP. They continually bleat on about losing billions in revenue from crooks using heating oil and red diesel in garages.
I expect they will bring in a massively complicated system that will allow commercial users to claw back the duty and ensure that another 10,000 people join the Government payroll.
At this rate 75% of the country will "work" for the government (including pensioners, invalids, unemployed as well as civil servants) and the other 25% will be paying tax at 80% to fund them.
In the rest of Europe they manage, they have deisel for pleasure boats, white. and red for fishing commercial boats, two pumps, why wouldnt that work here?
In many places it would be totally uneconomic for the marina to install both pumps, storage tanks etc so that they could charge the highest white diesel price in Europe for a very reduced market place.
If red goes and prices reach road prices plus a marina surcharge you are looking at a very reduced consumption on any basis.
I would also add that HM government is leaving this matter very late - if they are to apply for an extension, there is only a little over a year left - if they introduce a new class of diesel or a white diesel only policy for leisure craft they have left it very, very late for marinas to decide what to do, install new pumps etc.
I would guess that they are not going to apply for an extension and I would guess there is going to be one almighty mess and a lot of confusion as to who qualifies for red and who does not.
The most sensible way to remove the "Red" diesel would be (as previously mentioned) allow commercial vessels to claim back the duty on fuel. The few charter boats that are around would make so little difference to the government that even if they claim back "private" use it wouldn't matter too much. (although you'd probably get fined !!)
Continuing the "RED" bit of the diesel would still differentiate it from the road fuel so could still be cheaper (could, not would) and WOULD mean that fuel stations make no change.
So - if that is the most sensible way forward (assuming the loss of the Red diesel status) then that isn't the way it will be implemented ....
If it were to be implemented then that would be the best way to do it, which as you say, means that it would not be done that way ..... the department for messing things up in every ministry would ensure that.
"The few charter boats that are around would make so little difference to the government that even if they claim back "private" use it wouldn't matter too much. (although you'd probably get fined !!)"
Why would they not be commercial? They are commercial - they can claim back the little duty there is now and would no doubt continue to do so. Otherwise the government would have to change many rules and laws trying to decide what is and is not commercial .... that will not happen. Hence the my original point on the absurdity of all this.
Secondly, as regards the amounts involved being small - the total amount of leisure diesel sold is tiny and the government will almost certainly raise less total tax than they did before ...... this issue is not about money.
[ QUOTE ]
Why would they not be commercial?
[/ QUOTE ]
When the owner of a charter vessel takes the boat out for his annual cruise - that isn't commercial use (unless he pays himself the charter fee?) ... is it?
[ QUOTE ]
this issue is not about money.
[/ QUOTE ]
No, it is about bowing to presure from the EU ... again ... we'll probably loose "red" as a tiny part of a barganing deal for something totally different ... a deal that the other EU countries won't stick too ... but it is the principle of the thing, us British are used to be Shafted by the EU...
"When the owner of a charter vessel takes the boat out for his annual cruise - that isn't commercial use (unless he pays himself the charter fee?) ... is it?"
No agreed and stated in my opening post - but when he is chartering and taking others around for money then it is commercial isnt it? Hence if you take others for money you get cheap fuel - if you take yourself you do not....... that is absurd.
"No, it is about bowing to presure from the EU ... again ... we'll probably loose "red" as a tiny part of a barganing deal for something totally different ... a deal that the other EU countries won't stick too ... but it is the principle of the thing, us British are used to be Shafted by the EU... "
Spot on ...... I do not think the governement is even aware of this issue at any political level - they have to apply to have the dereg extended - they have not applied, no action means end of dereg and hence full road price for personal leisure users. .... we are seeing no action.
Scaramoosh
04-10-05, 13:54
I don't think I agree with your point that should derrogation go we HAVE to had road diesel pricing. We are already paying about twice the minimum EU price that we are supposed to be derrogated out of.
You are mixing up the fact of derrogation which says we have an opt out from the minimum price set for the whole of the EU to prevent one goverment subsidising its transport costs against the rest of the EU and what Mr Gordon Brown actually charges in terms of Duty and VAT on Red Diesle today.
It is entirely possible (granted not certain) that we don't have derrogation but the price doesn't change. It could even go down if HM Government decided that that what it wanted to do (unlikely I know but possible).
I agree that we would not HAVE to have road pricing .... I was exploring the way this government is acting by leaving its decision on the question of to apply for postponement or not so late ..... if everything was left without action it would mean road prices plus marina surcharge.
Of course the could decide to act and do anything they like - just as you say ---- its just that doing nothing would leave us with a road price plus.
Is current marine "red" the same as agricultural "red"?
Tony S
[ QUOTE ]
Is current marine "red" the same as agricultural "red"?
Tony S
[/ QUOTE ]
YES
When using petrol for commercial use the system exists to claim back a certain amount of the tax?
Rob
yes fishing boats, charter boats etc can claim back tax as well as VAT.
In your example, you'd do as you should do - rent the boat from the owning company and pay the going rate. Yep, you get the money eventually but it's quite normal for shareholders of other things to pay in the normal way (hotels shops etc) even though they own shares, even all the shares.
Sepretly, £7k a day is a bit hopeful.
duncanmack
14-11-05, 21:38
In France only fishing boats (and farmers) can use low-tax diesel. Leisure users use the same stuff and pay the same price as road users.
They come round and check what fuel is being "used" ie is in the tank and god help you if you've got red in a leisure craft.
Same applies here in road vehicles. The fuel checking units from HM Revenue and Customs take a sample and if you have red in your road vehicle you get a very large fine and can get the vehicle impounded (and sold at auction).
For vehicle read vessel and that's the way it'll work.
But it will not work that way for commercial charter craft - it cannot work that way for almost every diesel boat for many years because they will all have traces of red in them for many years .... what happens in France when you arrive with red in form a UK port?
duncanmack
16-11-05, 22:50
Paul,
They leave Brit boats alone at the moment. That, I suspect, will change.
Charter boats, Hmm, define a charter boat?
It would be interesting to see what French, Spanish etc charter companies do at the moment
ULSD or Raod Diesel as most know it has Lubricity Additive added to specified levels to reduce its 'Dry-ness' .... and in normal use shoul;d not be a problem to most engines in use ...
I have an older Perkins and when the change happens will not worry about using ULSD in it ....
How many out there add a small amount of kero or gasline to their diesel for winter ?? That is a drying agent literally in itself ...... has your engine suffered ?
There are no guarantees in all this - there will be posts of someones engine failed after change over- whether really due to red to ULSD will not be exactly known - but the connection will be made.
I do not say that everyone can chaneg without care - but most will be able to .... engine manufacturers such as Perkins will not like issuing definitive statements on this topic - same as I - as I am in the 'trade' so to speak ....
I don't spend hours and much effort meeting EU levels of fuel quality for nothing ...... Use of ULSD or Red is not such an issue for average yacht engine.
I'm sure that some enterprising get-rich quick twerp will market a fuel conditioner when it all happens .... costing a packet of course .....
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