Flat rate of 5% VAT to be charged on all leisure marine diesel

It’s more good news for leisure boat owners as the British Marine Federation releases its own detailed guidance on the upcoming change in Red diesel duty rates.

As of 1 November, leisure boat owners will have to declare what percentage of any diesel purchase is intended for domestic use. Any fuel for propulsion will attract a new 50p per litre duty rate.

However the latest briefing from the BMF indicates that HM Revenue and Customs plans to add just 5% VAT to both domestic and propulsion fuel for boat owners – a reversal of its earlier declaration that propulsion fuel would attract 17.5% VAT.

The following 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 0.70ppl which includes 9.69 ppl duty already paid to fuel supplier ):

Propulsion calculation (i.e. 60%)
60 litres @ 0.70ppl = £42
60 litres @ 0.4066ppl = £24.40 (additional duty)
VAT @ 5% = £3.32
Propulsion Total = £69.72

Domestic calculation (i.e. 40%)
40 litres @ 0.70ppl = £28
VAT @ 5% = £ 1.40
Domestic Total = £29.40

Transaction Total = £99.12
Source: HMRC