Duty on Red Diesel is to increase from 1st September

[Tiller Slave]

Red Diesel Duty - charged on that sold for propulsion goes up from 1st September.

This 'tax" is collected by the boatyard and then passed onto HMRC.

 

The quote below is the guidance note sent out to British Marine Federation members

 

"Red Diesel Duty Increase from 1 September 2009

 

Published on 20/8/2009

 

As announced in the Budget earlier this year, the duty on all types of fuel will increase from 1 September 2009.

This will have an impact on the pricing of Red Diesel.

 

The following is an illustration/example of a calculation of duty and VAT under the new arrangements.

It is intended to be an illustration only.

The proportion split between propulsion and domestic usage will vary.

 

HMRC have confirmed that VAT is charged at the reduced rate of 5% on fuel for propulsion and domestic use.

 

This example assumes a 60% (propulsion) and 40% (domestic) split for a purchase of 100 litres of red diesel (the price of diesel is assumed to be 70 pence per litre (ppl) which includes 10.80 ppl duty already paid to fuel supplier):

 

Propulsion calculation (i.e. 60%)

60 litres @ 70 ppl = £42.00

60 litres @ 45.39 ppl = £27.23 (additional duty)

VAT @ 5% = £3.46

Propulsion total = £72.69

Domestic calculation (i.e. 40%)

40 litres @ 70 ppl = £28

VAT @ 5% = £ 1.40

Domestic total = £29.40

Transaction total = £102.09

"

[Machpoint005]

Not clear, but isn't that just the same 2p/litre going on DERV fronm 1 September?

[soldthehouse]

Red Diesel Duty - charged on that sold for propulsion goes up from 1st September.

This 'tax" is collected by the boatyard and then passed onto HMRC.

 

The quote below is the guidance note sent out to British Marine Federation members

 

"Red Diesel Duty Increase from 1 September 2009

 

Published on 20/8/2009

 

As announced in the Budget earlier this year, the duty on all types of fuel will increase from 1 September 2009.

This will have an impact on the pricing of Red Diesel.

 

The following is an illustration/example of a calculation of duty and VAT under the new arrangements.

It is intended to be an illustration only.

The proportion split between propulsion and domestic usage will vary.

 

HMRC have confirmed that VAT is charged at the reduced rate of 5% on fuel for propulsion and domestic use.

 

This example assumes a 60% (propulsion) and 40% (domestic) split for a purchase of 100 litres of red diesel (the price of diesel is assumed to be 70 pence per litre (ppl) which includes 10.80 ppl duty already paid to fuel supplier):

 

Propulsion calculation (i.e. 60%)

60 litres @ 70 ppl = £42.00

60 litres @ 45.39 ppl = £27.23 (additional duty)

VAT @ 5% = £3.46

Propulsion total = £72.69

Domestic calculation (i.e. 40%)

40 litres @ 70 ppl = £28

VAT @ 5% = £ 1.40

Domestic total = £29.40

Transaction total = £102.09

"

Correct me if i,m wrong but thats the same price as derv where i,m from, near as dammit

[Naughty Cal]

Another reason to buy white diesel in containers

[alan_fincher]

Another reason to buy white diesel in containers

Not if the same tax increase is being applied to "white" as to "red" :lol:

[Naughty Cal]

Not if the same tax increase is being applied to "white" as to "red" :lol:

 

Well there is that.

[Machpoint005]

Not if the same tax increase is being applied to "white" as to "red" :lol:

If I'm right and it is 2p a litre, then that's 2p a litre on DERV, and 2p a litre on the dutiable portion of red - meaning just 60% of 2p, or 1.2p a litre, if you assume a 60/40 split. I'm not going to be rushing to fill up for a 'saving' of just over a penny a litre.

[furnessvale]

If I'm right and it is 2p a litre, then that's 2p a litre on DERV, and 2p a litre on the dutiable portion of red - meaning just 60% of 2p, or 1.2p a litre, if you assume a 60/40 split. I'm not going to be rushing to fill up for a 'saving' of just over a penny a litre.

 

It will be 2p on Derv and BOTH portions of red. The slight advantage for boaters is that VAT at 15% will then be added to the 2p on DERV but only 5% VAT on both portions of red.

 

George ex nb Alton retired

[David Schweizer]

It will be 2p on Derv and BOTH portions of red. The slight advantage for boaters is that VAT at 15% will then be added to the 2p on DERV but only 5% VAT on both portions of red.

 

George ex nb Alton retired

How come? Surely fuel duty is only applied to the fuel used for propulsion, I thought that fuel used for heating and generation was excempt from fuel duty. Or is this just another way that the Government is taxing us by stealth and decieit?

Edited August 22, 2009 by David Schweizer

[Albatross]

If it was all taxed the same as petrol it would stop a lot of midering

[Machpoint005]

How come? Surely fuel duty is only applied to the fuel used for propulsion, I thought that fuel used for heating and generation was excempt from fuel duty. Or is this just another way that the Government is taxing us by stealth and decieit?

Let's not let the facts get in the way of a good rant. The tax-on-propulsion-diesel thing wasn't HM government, it was the end of a derogation (concession, if you will) from Europe.

 

Red diesel is still a rebated fuel, but we have to pay extra duty on any of it used for propulsion. The tax per litre is going up on 1 September in the same proportion as tax on road fuels, so about a penny a litre on 'red' and another penny on 'red' used for propulsion, making about 1.5p a litre overall. Still not worth getting excited about, in my view. Road fuel goes up and down by a lot more than that with changes in the crude oil market and the dollar/sterling exchange rate.

[David Schweizer]

Let's not let the facts get in the way of a good rant. The tax-on-propulsion-diesel thing wasn't HM government, it was the end of a derogation (concession, if you will) from Europe.

 

Red diesel is still a rebated fuel, but we have to pay extra duty on any of it used for propulsion. The tax per litre is going up on 1 September in the same proportion as tax on road fuels, so about a penny a litre on 'red' and another penny on 'red' used for propulsion, making about 1.5p a litre overall. Still not worth getting excited about, in my view. Road fuel goes up and down by a lot more than that with changes in the crude oil market and the dollar/sterling exchange rate.

We could have a long arguement about the Government's lack of enthusiasm to support the continuation of EEC derogation, but that is now history.

 

My comment about taxing by stealth refers to the observation made by George that the 2p tax increase will also go on the rebated fuel, which would mean that the government will be effecvtively applying a tax designed for propulsion fuels onto heating fuel. Did they say that they would be doing that in the future, when it was agreed that boaters need not pay propulsion tax for that proportion of red diesel that they use for heating/generation?

Edited August 22, 2009 by David Schweizer

[furnessvale]

How come? Surely fuel duty is only applied to the fuel used for propulsion, I thought that fuel used for heating and generation was excempt from fuel duty. Or is this just another way that the Government is taxing us by stealth and decieit?

 

(The below comments were posted from my experience while selling red as an RDCO. It would appear that he has changed his spots and will not be applying the same increase to red and DERV as in previous years. There will however be an increase in red duty so the basic comments apply but I am unsure of the actual rates involved.)

 

Red diesel does not have the same rate of excise duty as DERV but it does have excise duty, currently around 10ppl. Every time the chancellor puts duty on road fuel he also puts duty on red.

 

On the last few occasions he has put the same on red as he has on DERV eg 2ppl. Given the lower starting rate on red this is a much higher percentage rate, well above inflation. He claims it is to help prevent misuse of red.

 

Eventually this policy will result in red and DERV being the same price so we can all stop worrying (except farmers, construction sites etc who will all be bankrupt).

 

On this occasion, as on previous ones, he will put 2p on DERV, AND 2p on the standard duty rate for rebated fuels so all red will go up 2p no matter what its end use.

 

George ex nb Alton retired

Edited August 23, 2009 by furnessvale

[CanalWalker]

canal boaters shouldnt have any tax breaks anyway so I cant see them having much to complain about.

[Yoda]

It is about time everyone registered for VAT and set their boats up as limited companies. That would create a fair situation for fuel tax.

[Justme]

It is about time everyone registered for VAT and set their boats up as limited companies. That would create a fair situation for fuel tax.

 

 

I think you are miles off target.

 

VAT on red is only 5%

 

Fuel TAX is much much more.

 

The small amount you could claim back would be dwaffed by the amount you would have to pay to "rent" the boat from yourself as that would be at 15%.

[David Schweizer]

(The below comments were posted from my experience while selling red as an RDCO. It would appear that he has changed his spots and will not be applying the same increase to red and DERV as in previous years. There will however be an increase in red duty so the basic comments apply but I am unsure of the actual rates involved.)

 

Red diesel does not have the same rate of excise duty as DERV but it does have excise duty, currently around 10ppl. Every time the chancellor puts duty on road fuel he also puts duty on red.

 

On the last few occasions he has put the same on red as he has on DERV eg 2ppl. Given the lower starting rate on red this is a much higher percentage rate, well above inflation. He claims it is to help prevent misuse of red.

 

Eventually this policy will result in red and DERV being the same price so we can all stop worrying (except farmers, construction sites etc who will all be bankrupt).

 

On this occasion, as on previous ones, he will put 2p on DERV, AND 2p on the standard duty rate for rebated fuels so all red will go up 2p no matter what its end use.

 

George ex nb Alton retired

Thanks for the explanation George.

 

Given that in the (recent) past, red diesel has always been free of excise duty, I was right to say this is another example of the Government taxing us by stealth andn deceit.

[alan_fincher]

Given that in the (recent) past, red diesel has always been free of excise duty, I was right to say this is another example of the Government taxing us by stealth andn deceit.

Actually David, it has not.....

 

I'm not sure when excise duty was first charged on rebated gas oil, but it was certainly at least 20 years ago, as downloadable documents on the HMRC web site will confirm.

 

It is definitely not a new thing, although it is true the lion's share of the increases in the duty charged have been in the more recent years.

[Machpoint005]

On the last few occasions he has put the same on red as he has on DERV eg 2ppl. Given the lower starting rate on red this is a much higher percentage rate, well above inflation.

Eventually this policy will result in red and DERV being the same price.

On this occasion, as on previous ones, he will put 2p on DERV, AND 2p on the standard duty rate for rebated fuels so all red will go up 2p no matter what its end use.

 

If there's 2p on DERV and 2p on red, how will red eventually 'catch up', please?

[alan_fincher]

If there's 2p on DERV and 2p on red, how will red eventually 'catch up', please?

It will not of course, and anyway there isn't!......

 

There seems to be a great deal of misinformation in this thread, although I'd be the first to admit that HMRC briefings are often difficult to find and/or interpret.

 

So far as I can see the rate of duty on fully taxed diesel is going up from 54.19 to 56.19 ppl, i.e. the quoted 2 pence increase per litre, (and identical duty rates to petrol).

 

However it seems the tax on rebated "red" is only rising from 10.42 to 10.80 ppl, i.e just .38 pence per litre, or less than one fifth of the increase on road fuel.

 

If that's right, then one has to look for other reasons for berating the government than this particular topic, I'm afraid.

 

 

I calculate that from 1st September what should be the difference in price between "propulsion" and "non propulsion" should rise to 48 pence per litre (in whole numbers)

 

56.19 - 10.80 = 45.39 pence difference per litre before VAT

 

Add 5% VAT to the difference gives 47.66 pence per litre extra for propulsion.

Edited August 23, 2009 by alan_fincher

[cotswoldsman]

How come? Surely fuel duty is only applied to the fuel used for propulsion, I thought that fuel used for heating and generation was excempt from fuel duty. Or is this just another way that the Government is taxing us by stealth and decieit?

 

Don't quite understand this comment. The fuel increase was part of the budget so everyone should have been aware. The government has to raise money from somewhere to pay for things like BW. I have never understood why boats should be run on red diesel. The duty increase we are talking about I think also goes on normal domestic heating oil but as I don't have the energy to llok at HMRC website might be wrong.

[furnessvale]

If there's 2p on DERV and 2p on red, how will red eventually 'catch up', please?

 

You are correct it will never actually "catch up" completely but let me explain my comments.

 

Say duty on DERV is 50p and duty on red is 10p for round figures. The chancellor consistently puts 2p on each. On DERV he will have increased by 4% and on red it will be 20%.

 

In a few years time duty has reached £10 per litre on DERV and £9.60 on red. Inflation means we are still paying the same amount of disposable income for diesel of whatever sort but, for working lads, red duty has caught up to DERV duty.

 

In reply to other comments, I accept that on this occasion, and for the first time in a number of years, the chancellor has NOT put the same increase in pence terms on both DERV and red but seems instead to have put on the same percentage increase. I have no doubt that post election the increases will revert to previous, ie same number of pence.

 

George ex nb Alton retired

[alan_fincher]

In reply to other comments, I accept that on this occasion, and for the first time in a number of years, the chancellor has NOT put the same increase in pence terms on both DERV and red but seems instead to have put on the same percentage increase. I have no doubt that post election the increases will revert to previous, ie same number of pence.

I can't follow this argument, I'm afraid.

 

When the duty rate for ULS DERV was introduced in 1997, (previously it was the same as the then ordinary road diesel), it was 39.28 ppl, currently it is 54.19 ppl (increase of 14.91 ppl in those 12 years)

 

The equivalent change in duty rate on rebated red gas oil was from 2.58 to 10.42 ppl, (increase of 7.84 ppl - little more that half that of duty increase on ULSD).

 

I can see little evidence of an identical rise being applied to "red" and "white" as a consistent policy - I'm not sure where you are getting that information from ?

 

What I will accept as true is that if a similar ppl increase is made on both products, then the overall effect in percentage terms is obviously higher for red.

[furnessvale]

I can't follow this argument, I'm afraid.

 

When the duty rate for ULS DERV was introduced in 1997, (previously it was the same as the then ordinary road diesel), it was 39.28 ppl, currently it is 54.19 ppl (increase of 14.91 ppl in those 12 years)

 

The equivalent change in duty rate on rebated red gas oil was from 2.58 to 10.42 ppl, (increase of 7.84 ppl - little more that half that of duty increase on ULSD).

 

I can see little evidence of an identical rise being applied to "red" and "white" as a consistent policy - I'm not sure where you are getting that information from ?

 

What I will accept as true is that if a similar ppl increase is made on both products, then the overall effect in percentage terms is obviously higher for red.

 

Taken over 12 years I accept your figures. Without breaking down the figures year by year I cannot prove that more recent policy has been to increase red and DERV by the same amount. I cannot name the date that Gordon hit on the wheeze of putting the same pence on both but he certainly did and, after the election, he (and David for that matter) will do so again.

 

The fact that the duty on red has risen by around 300% compared to DERVs less than 50% certainly shows a move in that direction.

 

George ex nb Alton retired

[alan_fincher]

Without breaking down the figures year by year I cannot prove that more recent policy has been to increase red and DERV by the same amount. I cannot name the date that Gordon hit on the wheeze of putting the same pence on both but he certainly did and, after the election, he (and David for that matter) will do so again.

Well so far as I can see if you go back around 2 years, then this was the situation for some of the historic increases, but the most recent example of it was October 2007, I believe.

 

The next increase is by no means the first recent example of "red" being increased far less than DERV.

 

So far as I can see the last two increases also put a massively smaller hike on the duty on "red" than on "DERV"

 

1/4/09 DERV up 1.84 Gas Oil up 0.35

1/12/08 DERV up 2.00 Gas Oil up 0.38

 

I think you may be remembering how it was handled for a while, not on how the last few increases have gone ?

 

I'm all for Gordon (or David) bashing, but I think the grounds for doing so here are rather flaky.