Boat Show briefing by RYA and HM Revenue and Customs
Boat owners threatened with a more than 40p per litre increase in the price of fuel by the end of the red diesel derogation on 1 November, may take some comfort from a declaration by HM Revenue and Customs this morning at the Southampton Boat Show.
The RYA is said to be ‘pleased’ with the outcome of negotiations over the amount of diesel that boat owners will be permitted to claim for domestic use – which will be taxed at a lower rate of duty.
A statement released by the RYA says: “analysis by both the industry and HMRC suggests that a split of 60% for propulsion and 40% for domestic use (heating, cooking etc) probably reflects most people’s use and it is therefore likely that many users will declare such an apportionment.”
Diesel for domestic use attracts a duty rate of around 9p a litre plus 5% VAT, while fuel for propulsion is taxed at 50.2p per litre plus 17.5% VAT.
The HMRC conclusions were as follows:
· Red diesel at the rebated rate will continue to be available for domestic purposes, such as heating and lighting
· When recreational boaters buy diesel for their craft, they will need to make a declaration to the supplier if they intend the fuel to be used for propelling a private pleasure craft
· The recreational boater will also declare what percentage of the fuel will be used for propulsion (as opposed to domestic purposes such as heating and lighting).
PBO spoke to Andrew Morton, RYA motor cruising projects manager, who said: “If you have an open RIB, you will have to declare 100% propulsion use for the diesel you buy. Boats with generators will be able to declare a higher proportion of diesel for domestic use and pay less duty on that proportion. Boats that live in marinas will struggle to prove that they are using a huge amount of diesel for anything other than propulsion. However, yachts on passage that run the engine for a few hours to charge batteries may declare that diesel used for charging batteries is for domestic, non-propulsion use and pay the lower rate of duty.”
HMRC has therefore confirmed to the BMF, RYA, and IWA that their advice on this issue is as follows:
“Q. What will be the allowance for fuel used on boats for heating and lighting?
A. There is no fixed allowance. It is for the purchaser to declare the percentage of fuel used for propulsion. However, analysis by both the industry and HMRC suggests that a split of 60% for propulsion and 40% for domestic use (heating, cooking etc) probably reflects most people’s use and it is therefore likely that many users will declare such an apportionment. This will make it easier for suppliers (RDCOs) to work out additional duty and VAT. However, where a purchaser knows that their propulsion use may be more or less than the above apportionment split or a craft clearly has no domestic use, then they must declare their actual intended usage.
Q. What about residential boat owners where nearly all fuel is for domestic purposes – what can they declare?
A. We have recognised the status of residential boat owners whose primary residence is their boat. Some of these will be at fixed moorings or move just a very short distance along the tow path from permanent moorings. If they live aboard the craft permanently and hold certain documentation, such as a Houseboat Licence, Residential Mooring Licence, Council Tax Bill in respect of the mooring, or other peripheral documentation, invoices or bills which provides proof of permanent residency, they may purchase all their fuel at the rebated rate (as if they were a commercial vessel). They will still be required to make and sign a declaration saying that 0% of the fuel is for propelling purposes. It will be the responsibility of the declarant to ensure that they hold the requisite documentation should HMRC wish to check the validity of the declaration made in these circumstances. Continuous cruisers may not declare 0% under these arrangements, even if they reside permanently on their craft, they must declare their actual intended usage for propulsion.”
For further info on the latest red diesel advice, see the RYA website