Introduction At the 1900 World’s Fair in Paris a German Dr Rudolph Diesel unveiled the world’s first compression-ignition engine capable of working on a number of fuels including peanut oil. It was not too long before the first hydrocarbon oil duty was first imposed in 1928 by Winston Churchill, as Chancellor of the Exchequer in Stanley Baldwin’s government. Full duty was imposed on light oils, such as petrol, and a lower rebated duty on heavy oils, e.g. as diesel. However in 1935 with the development of diesel engines for cars, petrol sales declined to such an extent that in 1935 the Government applied the full rate of duty to heavy oils e.g. diesel. An important distinction was made that this full rate of duty only applied to diesel for use as road fuel, agricultural vehicles and boats would still benefit from the lower rebated duty on fuel. Why this allowance was made to leisure boat owners back in the 1930’s is not clear but due to EU taxation alignment it ceases from the 01st November 2008 for owners of leisure boats who use red diesel to propel their craft. Red Diesel is a grade of gas oil for which low fuel duty is currently applied and has been artificially dyed red since 1961 to distinguish it from other fuels. Whilst almost identical to the ‘white diesel’ bought at the road side, red diesel contains higher sulphur content and is therefore less environmentally friendly. The centane reading also differ, in red diesel it is around 45 and in white diesel a minimum centane reading of 51is achieved. The higher the centane reading the better the engine should run. Presently At present for waterside users the marine red diesel is subject to a fuel low-duty rate of about 7.69 pence per litre p.p.l. and a VAT rate of 5%. The UK road user who purchases Ultra Low Sulphur Diesel (ULSD) or ‘white diesel’ at the roadside filling station pays a higher fuel duty of 48.35 p.p.l. and the higher VAT rate of 17.5%. The derogation of red diesel has existed since the 1930’s but is to cease following the confirmation that the European Directive 2003/96/EC is to be applied to UK private recreational craft from 1st November 2008. As an EU member, the UK is obliged to work from the same tax rules as everyone else and the transitional period to adjust to EU taxation rules will come to an end within this context. In contrast, already leisure boat users across the EU fill up with the same white diesel and pay the same level of fuel duty as their road users. Exceptions at present are UK, Ireland, Finland, Belgium, Malta and Corsica. The Future - from 1st November 2008 Red diesel is here to stay! Whilst various proposals were put forward red diesel is to be retained at marinas and waterside pumps, but sold at two different prices. Commercially operated craft are not affected and will continue buy at the current low-duty rate. The leisure boat owner who continues to buy red diesel is to be charged the top rate of fuel duty for heavy oil which is not ULSD or SFD (Sulphur Free Diesel) i.e. 56.94 p.p.l. fuel duty i.e. on Red diesel. If compared with supplying White Diesel rather than Red Diesel at waterside pumps there is an increase of about 6 p.p.l.in fuel duty by keeping Red Diesel at the pumps for leisure boat owners. However keeping the current supply lines in place will mean less disruption to the infrastructure. The leisure boat user is required to self-declare the duty difference at a later date. There is an exception that red diesel for domestic use on board is to be charged at the lower rate of fuel duty, the consumption levels of ‘domestic’ e.g. heating and other ‘domestic uses’ may experience a small increase from the 1st November 2008.
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