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Fuel-Duty and VAT on Pure Vegetable Oil

Excise Duty must be paid on any liquid fuel you use to power your vehicle. In addition, as pure vegetable oil used as road fuel is no longer considered a food-stuff, it is also liable to VAT.

This section details the discussions we have had with HM Revenue and Customs to ensure that they apply the correct duty rate.


What is the correct Duty rate?

Under the Hydrocarbon Oil Duties Act 1979, as amended by the Finance Act 2002, pure vegetable oil is a form of biodiesel, and so is subject to a road duty of 27.1 pence per litre, compared to 47.1 p/l for normal diesel.


Do I need to register with HMRC to run my car on veg-oil?

You can register with HMRC, but it is much easier to buy duty-paid fuel from a company like us, who are already registered, and keep the receipts as proof that the duty has been paid on your oil.

If you register yourselves, then you must keep a full record of all the oil you buy and set-aside as road-fuel, with all receipts etc., and submit a monthly return and a cheque for the total duty liability.


Why did HMRC start charging the wrong rate last year?

Towards the end of 2005, HM Revenue and Customs apparently received complaints from the large biofuels manufacturers about low grade biofuels being put on the market, derived from insufficiently purified used cooking oil, and were keen to stop this practice. They were apparently unaware that a stringent quality standard exists for pure rapeseed oil as a diesel fuel, and concluded that only chemically treated oil would meet the "diesel quality" criterion in the UK legislation, so started charging some people the full diesel rate of 47.1 p/l.

We received early warning of this decision from our local HMRC officer, who was very supportive of our efforts and keen to see us challenge this environmentally backward step.

We put together a lengthy justification for the fact that pure vegetable oil, whether new or used, is capable of being used for the same purposes as heavy oil, so does indeed count as biodiesel under the UK legislation, as long as it can be shown to be of a high quality.

Luckily, to fulfill our own quality-assurance requirements, we had already had samples of our oil tested against the german quality standard E-DIN 51605, so we managed to persuade the central oils policy team of HMRC that SVO tested to that standard attracts the lower duty rate.


Our legal case to keep the lower duty rate

1. Confirmation of our registration under the lower rate:


2. We are reclassified to the higher rate


3. We request a Formal Departmental Review

Download: RequestForReview

4. Our request for a Formal Review is denied on a tehcnicality


5. We request an Assessment, so that we can challenge it


6. Our case is passed to the central oils team


7. Written confirmation that our fuel is Biodiesel if regularly tested

Download: RegularTestingAcceptance

8. We clarify that our fuel IS just SVO, and state our testing plan

Download: AcceptanceReply

9. HMRC confirm that that is sufficient and wish us "Great Success"

Download: FinalConfirmation




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