Amendments to the UK rebated fuel marking requirements
Published 8 November 2023
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Who is likely to be affected
The businesses likely to be affected are those who release fuel for home use from refineries or tax warehouses subject to a reduced excise duty rate (known as the rebated rate). It will also affect businesses known as registered remote markers who add the designated markers to full duty paid fuel so it can qualify for the rebate, manufacturers of markers for use in fuel marking, and businesses and individuals who sell or use rebated fuel.
General description of the measure
This measure introduces changes to the markers that must be added to fuel to qualify for a reduced rate of duty. These amendments include the addition of a new marker and changes to existing markers and the colouring substance.
Policy objective
The measure introduces a new fiscal marker, n-butyl phenyl ether, for fuel taxed at a reduced duty rate. We have taken the opportunity to update our system at the same time as other jurisdictions, such as the EU. The measure also addresses minor issues with the red dyes used in the colouring substance to improve solubility and allows for oil to be used in the manufacture of a concentrated solution containing all of the markers
Background to the measure
The UK requires a combination of markers to be added to diesel and kerosene subject to a reduced excise duty rate. This includes a marker used across the EU, Solvent Yellow 124, and a marker jointly introduced with Ireland to address laundering of rebated fuel and cross border smuggling.
Detailed proposal
Operative date
The measure will have effect in relation to any fuel required to be marked to qualify for a rebate of fuel duty on or after 18 January 2024. A temporary amendment will also take effect from 1 December 2023 that allows the new marker to be added to fuel in advance of it becoming a ‘prescribed marker’. This provides a transitional period for users of marker concentrate to manage their stocks to ensure they are using the correct markers by 18 January 2024.
Current law
The Hydrocarbon Oil Duties Act 1979 (HODA) is the UK’s primary legislation on the taxation of hydrocarbon oils. It defines the different types of oils, provides for the rate of fuel duty charged on each, and the rebate allowed on certain types of oil. Sections 24 and 24A of, and Schedule 4 to, HODA allow HMRC to make regulations to require fuel to be marked for the purposes of allowing a rebate, and to designate markers that identify UK fuel, or fuel from anywhere outside the UK, that may not be used other than for permitted purposes in certain machines.
The designated markers are set out in The Hydrocarbon Oil (Designated Markers) Regulations 1996 (1996/1251).
The requirements for marking light oil, gas oil, kerosene, bioblend and biodiesel as a condition of allowing a rebate are set out in the Hydrocarbon Oil (Marking) Regulations 2002 (2002/1773).
Proposed revisions
The Hydrocarbon Oil Duties (Marking And Designated Markers) (Amendment) Regulations 2023 amends the Hydrocarbon Oil (Designated Markers) Regulations 1996 to add ‘n-butyl phenyl ether’ as a designated marker.
The Statutory Instrument (SI) also amends the Hydrocarbon Oil (Marking) Regulations 2002 to add n-butyl phenyl ether to the list of prescribed markers and to specify the quantities of the marker that must be added to rebated fuel. The Regulations will also be amended to allow the use of specific alternative dyes in addition to Solvent Red 24 to make up the colouring substance to be added to gas oil, light oil, biodiesel and diesel bioblend. References to the Colour Index are replaced by chemical names. The minimum amount of Solvent Yellow 124 required is reduced by 50% and the upper limit removed. Amendments also allow for oil to be used in the production of a concentrated solution containing the markers for diluting into a given volume of fuel and require markers to be evenly mixed into fuel.
Summary of impacts
This measure is not expected to have an exchequer impact.
Exchequer impact (£ million)
| 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2027 to 2027 | 2027 to 2028 |
|---|---|---|---|---|---|
| nil | nil | nil | nil | nil | nil |
Economic impact
This measure is not expected to have any significant economic impact.
Impact on individuals, households and families
The changes will have a very minor effect. The slight increase in the cost of fuel markers is likely to be passed on to customers but will have a negligible effect on the price per litre.
This measure is not expected to impact on family formation, stability, or breakdown.
As the marking requirements for the whole of the UK will be the same, the measure will have no impact on an individual’s experience of dealing with HMRC as there is no additional process or tax administration obligation.
Equalities impacts
It is not anticipated that there will be impacts on those in groups sharing protected characteristics.
Impact on business including civil society organisations
The changes will have a negligible impact on businesses known as registered remote markers who add the designated markers to full duty paid fuel so it can qualify for the rebate, manufacturers of markers for use in fuel marking and those businesses that release rebated fuel for home use.
One-off costs will include familiarisation with the new marking requirement. There are not expected to be any continuing costs.
As the marking requirements will be the same for the whole of the UK, the measure will have no impact on a business’s experience of dealing with HMRC as there is no additional process or tax administration obligation.
The measure is not expected to impact on civil society organisations.
Operational impact (£ million) (HMRC or other)
HMRC will need to acquire testing equipment to test for the new marker or update its current testing equipment. Further work is ongoing to determine those costs.
Other impacts
Other impacts beyond those already identified have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through communication and stakeholder engagement with trade bodies and other representative businesses.
Further advice
If you have any questions about this change, please contact Steve Clarke on the Excise Fuel Duty Policy Team:
Telephone: 03000 577 317
Email: steve.clarke2@hmrc.gov.uk or oils.policymail@hmrc.gov.uk
Declaration
Gareth Davies MP, Exchequer Secretary to the Treasury has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.