Red Diesel

[Nick_H]

I did not want to be involved in hysterical press ranting.........MBM Greg.

I am still a wee bit wounded when I predicted on the PBO Forum shortly following announcement of the HMRC 60/40 solution that the French had already called 'foul'.
Prediction was met with me almost being branded a heritic.

Here is what I have posted elsewhere;

My pragmatic view is that nothing has changed.

Before I retired was involved with intial negotiations with DTI and HMRC over introduction of zero sulphur fuel to meet the Non Road Mobile Machinery Directive together with the sideshow, which was the ending of our Derogation on fuel taxation.

HMRC came up with the wonderfully pragmatic 60/40 split to take some of the pain out of the tranistion and avoid huge infrastructure costs early on. I was still getting meeting notes at the time our Derogation ended and the French were adamant the 60/40 split was a clear breach of the EU Directive and declared that they would take the UK to Court. Since 2008 we have lived in limbo land. Recently Belgium seems to have taken up the cudgels, surprisingly the French are still pretty laid back with regard to enforcement.

The latest ministerial announcement is once again pragmatic. The full might of the Commission was about to take us to Court over UK's failure enforce the Directive, this announcement simply side steps the issue and avoid a costly legal battle which we were bound to loose.

Following the end of Derogation you were ALWAYS cruzin for a bruzin going to EU country with red in your tanks. This announcement just takes the UK Government out of the firing line.

You may be correct in all that, but its not what the HMRC note says. The note says that the issue is having duty paid fuel marked red (ie. the 60% used for propulsion which has had duty paid on it, but is still dyed red). The complaint is not about the 60/40 split itself, so if the 60% was white, and the 40% red, then in theory the problem would go away. Of course this would mean two fuel tanks, and there would then be no way of avoiding the obvious logic that the red tank should only be connected to the heating system, and the white tank to the engines, so the 60/40 split would go by default, because you'd use what you use for each purpose. For most boaters this would mean higher aggregate fuel costs, because if we're honest most of us don't use 40% for heating, and in fact most wouldn't bother with the cost of installing a second tank to save a bit of tax on the small amount of fuel used for heating. This may be the real goal of the EU, to get rid of the 60/40 split by picking up on a technicality of fuel marking.

[Latestarter1]

You may be correct in all that, but its not what the HMRC note says. The note says that the issue is having duty paid fuel marked red (ie. the 60% used for propulsion which has had duty paid on it, but is still dyed red). The complaint is not about the 60/40 split itself, so if the 60% was white, and the 40% red, then in theory the problem would go away. Of course this would mean two fuel tanks, and there would then be no way of avoiding the obvious logic that the red tank should only be connected to the heating system, and the white tank to the engines, so the 60/40 split would go by default, because you'd use what you use for each purpose. For most boaters this would mean higher aggregate fuel costs, because if we're honest most of us don't use 40% for heating, and in fact most wouldn't bother with the cost of installing a second tank to save a bit of tax on the small amount of fuel used for heating. This may be the real goal of the EU, to get rid of the 60/40 split by picking up on a technicality of fuel marking.

I understand EXACTLY the position of HMRC as well as the EU. As I have said all along the 60/40 split was a pragmatic solution to avoid the huge economic impact on our marine diesel fuel distribution infrastructure which is based on red diesel, they know nobody uses 40% for heating, was just wheeze to try and get us off the hook which one of the French MEP's objected to when it was first proposed as our solution.

The ship has sailed, in fact it is over the horizon. We either accept that those visiting an EU member state may involve paying an ad-hoc tax or the majority of us are stuffed with a huge increase in our fuel costs.

Let me ask our firebrand journals and toothless RYA exactly what outcome they are trying to lobby for?

[PaulGooch]

The problem is not that the red diesel isn't taxed, it is that red diesel is available to pleasure boat owners and is taxed at a different rate to other types of diesel used for propulsion. Apparently that contravenes EU directives which are designed to stop countries giving their own specific industries a competitive advantage through their tax and duty system. If red diesel for pleasure boats was taxed at the same rate as road diesel, there would be less of an issue although the use of marked fuel in pleasure boats is still considered improper use AFAIK. Other EU countries use is a system in which white diesel is available to all users but only commercial users can buy it at a rebated price

That isn't the current issue Mike. The issue is, we are in breach of the EU directive that states we cannot use marked fuel. Nothing to do with duty or the 60/40 split, it's purely that the diesel is not diesel coloured.

[PaulGooch]

I'm finding it hard to see how we'll still be using red in the very near future. Nothing has changed with regard to the UK breaking the directive preventing the use of marked fuel, we are still in breach of that directive. I suspect that the EU will still be taking action against us and that we will ultimately have to switch to unmarked fuel. At which time, i cannot see the 60/40 split being allowed by our Gov't. Allowing people to buy white diesel at £1 litre will be open to serious abuse.

Expect to be buying white diesel at £1.50 or so a litre sometime soon (relatively). If you want to use 40% for the Ebersplutter, fit a second tank for red.

As it currently stands i suppose you could have two tanks. White for being in another EU country, red for being here. If the red tank was filled with fuel at the 60/40 split you could legitimately use it here, under current rules. But, if (when) we switch to white you couldn't use the red in the engine, as it wouldn't be duty paid.

[mikef]

That isn't the current issue Mike. The issue is, we are in breach of the EU directive that states we cannot use marked fuel. Nothing to do with duty or the 60/40 split, it's purely that the diesel is not diesel coloured.

Yup because that marked fuel is taxed at a different duty rate than other diesel

[PaulGooch]

Yup because that marked fuel is taxed at a different duty rate than other diesel

I don't think that is the case Mike. We pay full duty for all of our propulsion fuel, the 60% in the split (OK we all know that's nonsense). The EU say no-one can use marked fuel and if you read the recent email from the Belgium embassy, that's also what they say.

[joliette]

I'm finding it hard to see how we'll still be using red in the very near future. Nothing has changed with regard to the UK breaking the directive preventing the use of marked fuel, we are still in breach of that directive. I suspect that the EU will still be taking action against us and that we will ultimately have to switch to unmarked fuel. At which time, i cannot see the 60/40 split being allowed by our Gov't. Allowing people to buy white diesel at £1 litre will be open to serious abuse.

Expect to be buying white diesel at £1.50 or so a litre sometime soon (relatively). If you want to use 40% for the Ebersplutter, fit a second tank for red.

As it currently stands i suppose you could have two tanks. White for being in another EU country, red for being here. If the red tank was filled with fuel at the 60/40 split you could legitimately use it here, under current rules. But, if (when) we switch to white you couldn't use the red in the engine, as it wouldn't be duty paid.

If diesel boaters are heading for a 50% hike in fuel costs (and I think the politics are driving us towards that), what will result? Will diesel boaters swallow the additional cost, spend more time in the Marina, or give up and put their boats on the market?

It'll be interesting to observe ... I wonder if the manufacturers have seen this one coming and have a strategy to deploy to support future sales of new boats, and I wonder how it will impact the secondhand diesel boat market ...?

[maby]

That isn't the current issue Mike. The issue is, we are in breach of the EU directive that states we cannot use marked fuel. Nothing to do with duty or the 60/40 split, it's purely that the diesel is not diesel coloured.

This is certainly not the end - it helps protect HMRC against costly legal action, but the EU will not give up until red diesel is no longer available to non-commercial users for propulsion purposes.

And the suggestions that you could fit two tanks with a change-over valve will not work - you can still get penalised so long as there is any possible path for mrked fuel into your engine - don't forget that this legislation was not actually designed for us, it was designed to stop farmers running their gas-guzzling Range Rovers on red as they hack down the M1.

[maby]

If diesel boaters are heading for a 50% hike in fuel costs (and I think the politics are driving us towards that), what will result? Will diesel boaters swallow the additional cost, spend more time in the Marina, or give up and put their boats on the market?

It'll be interesting to observe ... I wonder if the manufacturers have seen this one coming and have a strategy to deploy to support future sales of new boats, and I wonder how it will impact the secondhand diesel boat market ...?

I guess the politicians would point out that the only people that will see a significant extra cost are those that were using the current rules to evade tax. Personally I have no problem with tax evasion, but it does tend to catch up with you eventually.

[Latestarter1]

In all the fuss what percentage of UK motorboaters visit EU member state?

We discussed the impact of switching to road fuel with interested parties and DTI back in 2001/2002, the assessment at the time was that up to 50% of marine outlets would cease to handle fuel if we switched.

Remember road fuel is not the answer, we have made all that fuss. IF road fuel WAS made available in Marinas etc it would be significantly more expensive than filling stations due to low turnover.

The prospect of undyed marine fuel circulating in the distribution system is technically frightening and the cost of a low volume refined fuel would be big $$.

The DTI is aware of all the damaging commercial issues to our economy.

From where I sit all I see is a bunch of turkeys voting for Christmas.......