Guidance

Registered dealers in controlled oil (Excise Notice 192)

Find out about the registered dealers in controlled oil (RDCO) scheme.

• From: HM Revenue & Customs
• Published: 17 December 2015
• Last updated: 7 November 2024 — See all updates

Parts of section 5 of this notice have the force of law under the Hydrocarbon Oil (Registered Dealers in Controlled Oil) Regulations 2002 and The Revenue Traders (Accounts and Records) Regulations 1992.

The sections of the notice that do not have the force of law are for guidance only and are (where applicable) HMRC’s current view of the law as at the date of the publication of this notice. These sections of the notice do not replace or amend the law.

1. Overview

1.1 Information in this notice

This notice is about the Registered Dealers in Controlled Oil (RDCO) Scheme. Under this scheme, anyone intending to sell or deal in controlled oils must be approved to do so. Read paragraph 1.4 for more information.

This notice will help you understand:

• if you’re eligible for exclusion from the scheme
• if you qualify for annual returns
• how you should seek registration or approval
• your obligations to take reasonable steps to make sure that the controlled oils are only supplied to entitled end-users
• the returns that you’ll need to make to us containing certain information about your supplies
• what records you need to keep
• the sanctions and penalties that will be imposed if you fail to comply

1.2 Who should read this notice

You should read this notice if you handle, sell, or deal in controlled oils, or intend to. The scheme would include for example:

• oil producers (refiners’ warehouses)
• main and secondary distributors supplying end-users (both commercial end-users and the public)
• dry brokers who do not take physical possession of oil — this means they do not hold or store oil in tanks on their sites, or on third party sites

Unless you qualify for exclusion from the scheme you’ll not be able to carry on this activity, unless you’re registered and approved by us. Read section 3 ‘Exclusions’. It’s important, therefore, that you read this notice carefully.

1.3 What law covers this notice

Primary legislation:

• The Hydrocarbon Oil Duties Act 1979 (HODA)
• The Finance Act 1994
• The Finance Act 2002
• The Customs and Excise Management Act 1979 (CEMA)
• The Finance Act 2008 Schedule 41

Secondary legislation:

• The Revenue Traders (Accounts & Records) Regulations 1992
• The Hydrocarbon Oil (Registered Dealers in Controlled Oil) Regulations 2002 (SI 2002 No 3057)
• The Hydrocarbon Oil and Bioblend (Private Pleasure-flying and Private Pleasure Craft) (Payment of Rebate, etc) Regulations 2008
• Biofuels And Other Fuel Substitutes (Payment of Excise Duties etc.) Regulations 2004
• The Hydrocarbon Oil (Marking) Regulations 2002 (SI 2002 No 1773)
• The Hydrocarbon Oil (Designated Markers) Regulations 1996 (SI 1996 No 1251)

1.4 What controlled oils are

Controlled oils are some of the products given a rebated rate of duty under Section 11 of the Hydrocarbon Oil Duties Act 1979, these are:

• marked rebated gas oil (red diesel) including ultra-low sulphur gas oil and hydrotreated vegetable oil (HVO)
• marked rebated kerosene (paraffin, burning oil, and so on)
• aviation turbine fuel (avtur), aviation kerosene, JetA1, ATK, SAF
• marked rebated biodiesel
• marked rebated bioblend
• rebated fuel substitutes for gas oil and kerosene

These have:

• been marked in accordance with Regulation 4 of the Hydrocarbon Oil (Marking) Regulations 2002 (as amended by SI 2007/1416 and SI 2008/753) (excluding avtur and fuel substitutes)
• the marker present at the time of delivery (excluding avtur and fuel substitutes)
• the oil delivered to the UK market for either domestic or commercial use

2. Background and general information

2.1 Who is affected by this scheme

This scheme is for anyone who sells or deals in controlled oils. It includes:

• places of production — refiners’ warehouses
• import warehouses who mark oil on import

It also includes the following main and secondary distributors:

(a) dry brokers, who sell or deal in controlled oil but who do not take physical possession of that oil

(b) owners of oil in warehouse

(c) distributors who supply commercial and domestic end-users

(d) operators of duty paid oils terminals which are Registered Remote Marking Premises marking their own oil

(e) waste oil dealers who obtain rebated oil (either because it is surplus to requirements or because it is waste) and:

• clean it themselves for onward supply as rebated oil
• deliver to another company for cleaning and onward supply
• supply surplus oil for use as rebated oil

(f) intermediary suppliers who deliver fuel to the tanks of commercial ships and other marine vessels excluding private pleasure craft

2.2 Agents

The scheme does not apply to agents (including mutual co-operatives) who arrange a supply of controlled oil on behalf of someone else (a principal) where the:

• supplier of the oil has accepted that the customer is the end-user
• controlled oil is delivered direct by the registered dealer in controlled oil to the person or end user on whose behalf you’re acting
• invoice issued by the registered dealer in controlled oil is addressed to the person or end user on whose behalf you’re acting

If you do not meet all of these criteria, you’ll need to apply for approval as a registered dealer in controlled oil. This is because the oil supplier will not not know who the customer is (the agent or the end user). This means they’ll not be able to carry out relevant checks set out in Section 5 Supplying or selling controlled oil.

If you handle, sell or deal in controlled oils, you’ll need to be approved as a registered dealer in controlled oil .

2.3 Exclusions from the scheme

For circumstances where distributors of controlled oil are excluded from the scheme read section 3 ‘Exclusions’. Also excluded are:

• dry brokers of fuel supplied directly to commercial ships by an RDCO (read section 3.5)
• plant hire companies who supply controlled oils as part of the hire agreement for the equipment — read Appendix B)

2.4 What to do if you think you should be in the scheme

Unless you qualify for exclusion from the scheme, you’ll need to seek approval from us in order to carry on a business as a distributor of controlled oils. Read section 4 ‘Approvals’ for more guidance.

2.5 Enquiries

If you have any general queries about how the scheme works, you should contact the excise enquiries helpline.

If you have already submitted an application form and you either wish to check its progress or have a specific query relating to your application then you should contact the Mineral oils relief centre at morcapprovalsteam@hmrc.gov.uk by email.

If you want to check someone else’s RDCO number before selling controlled oils to them, you can either call the excise enquiries helpline, or you can use the Rebated Oils Enquiry Service.

2.6 Conditions of the scheme

As an approved registered dealer in controlled oil, you must comply with the following general conditions:

General Condition	Detail	Further information
Approval	You must be approved before you sell or deal in controlled oil (unless you qualify for an exclusion). You must operate within the scope of your approval — for example, you should only receive and store the types of controlled oil we have approved you to deal in, at the premises notified to you in your approval certificate and covering letter.	Read section 3 ‘Exclusions’ and section 4 ‘Approvals’
Supplies	Distributors must take reasonable steps to make sure that their customer is properly entitled to receive the oil that is being supplied.	Read section 5 ‘Supplying or selling controlled oil’
Returns	Distributors must submit monthly returns (or annual returns if we have approved you to do so) detailing the supplies made in the period. The level of information will depend on the nature of the supply.	Read section 6 ‘Returns’
Records	As revenue traders, distributors must comply with the Revenue Traders (Accounts and Records) Regulations 1992 — read Excise Notice 206: revenue traders’ records, and any additional record-keeping requirements specified in section 7 .	Read section 7 ‘Revenue accounts and records’

2.7 Failing to comply with the requirement to be approved

You must not deal in controlled oils until you’ve been approved by HMRC.

If, during your business, you deal in controlled oils without being approved by us to do so, you’ll be liable to a civil penalty, and forfeiture of:

• the oil that you hold
• anything mixed with that oil
• any container in which that oil is kept
• any equipment kept for dispensing that oil that you hold

This includes purchases of controlled oil for which your business has no legitimate use.

The circumstances and extent of your failure to comply with this requirement will subsequently be considered in assessing whether you’re a fit and proper person to be approved as a registered dealer in controlled oil.

Read paragraph 4.1 on how to apply for approval.

2.8 Failing to comply with the conditions of the scheme

If you fail to comply with any of the conditions shown in paragraph 2.6, we may apply sanctions against you. These may range from warning letters, to civil penalties and ultimately a withdrawal of your approval. In the event of the latter, the only controlled oils you may deal in are those that you receive and sell in pre-packaged containers not exceeding 20 litres.

2.9 If you have a complaint

More information about our complaints procedures is available.

3. Exclusions

3.1 Who is excluded from the scheme

The scheme does not apply to distributors who receive and sell any of the controlled oils only in pre-packaged containers not exceeding 20 litres.

3.2 What to do if you receive controlled oil in bulk and decant into pre-packaged containers not exceeding 20 litres for onward supply

If you do this you’ll not be excluded from the scheme and will need to seek approval (as explained in section 4 ‘Approvals’). This includes if you order a bulk supply and arrange to collect in your own small containers. However, if you only supply in pre-packaged containers not exceeding 20 litres you’ll not be required to make returns to us (read section 6 ‘Returns’).

3.3 Records to keep of these sales

Keep records to demonstrate how you have disposed of the oil. However, we only need you to keep the normal commercial documentation required under the Revenue Traders (Accounts and Records) Regulations 1992. There are no additional records for the purposes of this scheme.

3.4 If you make supplies of avtur

If you deal in avtur (including as a dry broker) you must register with us and be approved as a registered dealer in controlled oil to be able to carry on this activity. The usual obligations of the scheme apply. Section 5 ‘Supplying or selling controlled oil’ gives details on the registered dealer in controlled oil’s obligations. We do not, however, require submission of returns in respect of supplies of avtur.

You should also read Aviation turbine fuel (Excise Notice 179a), in particular:

• section 3 which on the delivery and storage requirements for avtur
• section 4 which details your obligations when dealing in avtur

In addition, if you’re supplying avtur for private pleasure aircraft, you should also read Fuel used in private pleasure craft and for private pleasure flying (Excise Notice 554).

3.5 If you make supplies of marine fuel to commercial ships and vessels

Anyone who deals in marine fuel (including as a dry broker) must normally register with us and be approved as an RDCO to be able to carry on this activity. The usual obligations of the scheme apply. Section 5 ‘Supplying or selling controlled oil’ gives details on the registered dealer in controlled oils obligations.

The exception is where a dry broker is not located in the UK and the approved registered dealer in controlled oil:

• delivers the oil directly to the commercial vessels on behalf of the overseas dry broker

• accepts responsibility for complying with the obligations of the scheme

In this case, the overseas broker is not treated as the supplier of the oil, providing:

• they do not take physical possession of the oil
• the supplying RDCO has carried out the necessary checks and is satisfied that the ship will use the fuel for commercial purposes
• the oil is delivered directly to the ship by the supplying registered dealer in controlled oil
• the supplying registered dealer in controlled oil shows the supply to the end user in their RDCO return
• the supplying RDCO’s invoice to the dry broker includes a statement confirming they accept responsibility for the RDCO obligations when delivering fuel to the ship
• the dry broker’s invoice to the ship owner or operator includes the name and RDCO approval number of the RDCO who will make the supply to the ship.

In effect, the criteria relating to agents apply, except that the supplying RDCO can invoice the dry broker for the fuel they supply on their behalf rather than the user.

This exception does not apply to dry brokers located in the UK or in any other circumstances.

3.6 If you make supplies of rebated fuel substitutes for use in excepted machines

If you deal in rebated fuel substitutes intended for use in excepted diesel machines or in kerosene heating systems, you must register with us and be approved as a registered dealer in controlled oil. The usual obligations of the scheme apply. Section 5 ‘Supplying or selling controlled oil’ gives details on the RDCO’s obligations. We do not, however, require submission of returns in respect of supplies of rebated fuel substitutes.

You should also read Excise Notice 179a: Biofuels and other fuel substitutes, which details your obligations when producing and dealing in fuel substitutes.

3.7 Multi-sites

If you’re a single legal entity — a company, partnership or sole proprietor — we’ll consider your total operations. We’ll do this even if some of your sites qualify for exclusion from the scheme. So even if only one site fails to qualify for exclusion, you’ll need to seek approval. You will not need to make returns to us of any supplies you make in pre-packaged containers not exceeding 20 litres or of avtur.

3.8 Changes in your circumstances

If your circumstances change and you no longer qualify for exclusion, apply for approval as a registered dealer in controlled oil. This process will normally take 30 working days to complete.

It’s important that you make your application in good time and provide the information detailed in section 4 ‘Approvals’ of this notice that will allow us to process your application.

Without this approval you’ll not be able to trade in controlled oils. If you do so without having been approved you’ll be liable to either or both:

• a civil penalty
• forfeiture of the oil

The approvals system is explained in section 4 ‘Approvals’.

4. Approval

4.1 Applying for approval

You’ll need to apply to us to be approved as a registered dealer in controlled oil if you do not qualify for exclusion (read section 3 ‘Exclusions’). You’ll need to give us the information that we require to decide whether you should be approved. After we’ve considered that information, and carried out any checks we think necessary, we’ll let you know whether you’re approved.

Apply for registered dealer in controlled oils approval using form HO4. Send the completed form to the address shown on the form.

The application form must be signed, in the case of a:

• sole proprietorship — by the sole proprietor
• partnership — by one of the partners
• company — by a director, company secretary or authorised signatory

Creating a comprehensive business plan

Your completed form HO4, must be supported by a comprehensive business plan. It should meet the following criteria.

1. It must describe the nature of the proposed business:
   • what your intended trading activity is
   • what products you’ll deal in
   • must include estimates of the volumes in litres of each — including avtur, fuel substitutes for rebated diesel and kerosene, and marine fuels
   • must show whether and how your business will differ from your competitors

2. It must explain why the business is being set up and why you want to deal in controlled oils.

3. Give the previous owner’s and or previous business name, if you’ve taken over the business from someone.

4. It must explain:

   • what problems or issues you may encounter
   • what opportunities you have identified in the sector
   • give details of key competitors and any available financial incentives, including government grants.

5. Describe the business’s sales and marketing strategy and gives details of your intended pricing policy.

6. It must give financial information for your business including details of:

   • capital invested, such as start-up investments, loans, or other financing arrangements
   • your projected sales and cost
   • any HMRC debts

7. Include details of all your premises and whether they have been purchased or leased. If you are found to be dealing or storing oil at premises not listed in your original application after approval, we may take action listed within section 8 ‘Action taken if you fail to meet your obligations as an RDCO’.

8. Provide details of key persons and their roles including:

   • full name
   • date of birth
   • National Insurance number

9. Give details of key persons with any unspent criminal convictions in respect of any offence of dishonesty, fraud, terrorism or organised crime. An unspent conviction is one that has not expired under the terms of the Rehabilitation of Offenders Act 1974).

10. Give details of any key persons currently under investigation for, or charged with, any offence of dishonesty, fraud, terrorism or organised crime.

11. List your important assets such as premises and equipment . You should include full details of vehicles, storage tanks and pumps used by the business.

12. Indicate whether fuel will be supplied to customers while your premises will be unattended for any period.

13. Explain how you’ll meet your obligations as a registered dealer in controlled oils. This should include any specific provisions and robust controls you’ll put in place if any of the sites are to be unattended, either temporarily or permanently.

14. Give details of the arrangements that you have in place to make sure the security of the stock (for example secure systems, CCTV).

15. Give details of health and safety measures that you have in place for the protection of employees, customers and visiting HMRC officers.

Key persons are those who have an important role or interest in the management, operation or financing of the business to the extent that they are one of its guiding minds. This includes any individual or business, whether directly involved in the day-to-day running of the business, who:

• provides premises or equipment for use by the business
• has a shareholding of 5% or more

Until you’re approved you cannot deal in controlled oils. It’s therefore in your interest to make your application in good time and make sure that it’s accurate and complete and gives all the information needed.

4.2 What we’ll do with your application

When we receive your application we’ll check it has been completed correctly and in full. If it’s incomplete, or is in any way unclear, we’ll ask you to supply either the missing information or clarification, or both. We will not progress your application until that’s been done.

After that, assuming there is nothing in your application to justify refusing your approval outright, we’ll perform checks. These will tell us that:

• the information you’ve given us is full and accurate
• you’re suitable for approval

These will involve checks of our records and, in the case of a company, are likely to include checks with Companies House. They may also include checks with:

• other government departments and agencies
• credit rating providers

Our checks will usually include a visit to you, during which we’ll look at your premises and everything you do there. We’ll ask you for details about (but not limited to) your:

• suppliers
• customers
• business plans
• accounting and stock control systems
• premises suitability and security
• financial viability

If we discover that the information you’ve given us is untrue or incomplete in any important aspect, your application for approval may be denied.

If these checks do not give enough assurance that the business is suitable for approval, we may ask for more information. Your application will be put on hold until this information is received and checked to our satisfaction.

4.3 Fit and proper test

We’ll only approve your application if we’re satisfied that:

• you’re fit and proper to deal in controlled oils
• you’ll deal in controlled oils in a way that helps us protect the tax system

This means we must be satisfied the business is genuine and that you will supply controlled oils responsibly by:

• only supplying to customers with a legitimate use for them
• making sure that all persons with an important role or interest in the business are law abiding, responsible, and qualified

a) We’ll only approve you if you satisfy us that:

• the business is genuine and commercially viable
• your premises will be secure and suitable for storing and dealing in controlled oil
• appropriate control will be exercised over the product, persons and vehicles entering and leaving the premises
• all rebated fuel supplied at or from your premises will be accurately measured and recorded
• your accounting and stock control systems will be adequate
• you’ll give safe and secure access for our officers to all parts of your premises
• you’ll be able to meet the obligations described in paragraph 5.2
• everyone employed by the business is eligible to work in the UK

b) We are very unlikely to give approval if the business, or anyone with an important role or interest in the business:

• has an unspent criminal conviction for:
  • any offence of dishonesty
  • any offence linked to terrorism or organised crime
• is currently under investigation or has been charged in relation to any such offences
• previously had their registered dealer in controlled oil registration revoked
• previously had their application for approval as an RDCO refused, and the reasons for the refusal remain
• at any time, has had strong links with, or been involved in the running of, a previously non-compliant RDCO — this includes:
  • where we have reason to believe the business is merely a continuation or resurrection of a non-compliant RDCO
  • a business whose approval was revoked by the Commissioners or cancelled at the approval holder’s request
• been involved in any form of fuel fraud — we’ll consider that to be the case where they’re linked to:
  • seizures of laundering equipment
  • premises on which laundered or unlawfully mixed fuel has been found
  • premises from which laundered fuel (or rebated or other blend of fuel) has been supplied
  • deliveries of rebated fuel to places where laundering or unlawful mixing has taken place
  • smuggling of fuel from outside the UK
  • illegal mixing or extending of rebated fuel or fuel taxed at the road fuel rate
  • the misuse of rebated fuel, whether they misused the fuel themselves or in any way negligently, recklessly or knowingly assisted another person to misuse rebated fuel
• had oil or vehicles or any other revenue goods seized from them
• has a history of fraudulent behaviour, including misrepresentation or identity theft
• dealt in controlled oil without approval, particularly:
  • if they have continued to deal in controlled oil following notification by HMRC
  • if we have any other evidence they were aware of the requirement to be approved

c) In addition, we’re unlikely to approve an applicant if we have evidence that they, or any person with an important role in the business:

• is an undischarged bankrupt
• is the subject of an undischarged sequestration order
• has been subject to a confiscation order under the Proceeds of Crime Act 2002
• is associated with known non-compliant persons or fraudulent businesses
• has been involved in attacks against or abuse of tax repayment systems
• has a reckless attitude to their tax responsibilities
• has outstanding, unmanaged, HMRC debts or a history of poor payment
• has a poor revenue compliance record (for example poor record keeping in spite of warnings)

These lists are not exhaustive, we may refuse to approve you for reasons other than those listed, if we have justifiable reservations about your suitability to deal in controlled oils.

4.4 Granting or refusing approval

If we accept your application, we’ll issue a certificate of approval. You should check the accuracy of the details on the certificate which should be kept in a safe place and made available to our officers on request. You should report any inaccuracies immediately to the Mineral Oils Relief Centre by email.

We’ll only grant an approval for controlled oil types:

• if you have a genuine business need to supply
• for premises that we consider are suitable to receive and securely store rebated fuels

Your registered dealer in controlled oils approval will only cover controlled oil types or premises that you mention in your application or supporting business plan.

Your approval certificate will show:

• The controlled oil types you’re approved to deal in
• your premises
• details of any conditions and restrictions that we have placed on your approval

If we have not named any controlled oil types or any specific conditions or restrictions relating to them on your approval certificate you are generally approved to supply any controlled oils.

Refusing an approval is not a decision that is taken lightly and is based on evidence that could be put before a tribunal. The reasons for refusal are set out in a letter to the applicant. The refusal is subject to appeal, and your rights and procedures for requesting a review of the decision will be included in the letter.

For more information on HMRC review and appeal procedures read Disagree with a tax decision.

4.5 Conditions and restrictions

This paragraph has the force of law.

You must not deal in controlled oil types or from premises not listed on your approval certificate without providing the required notice to us.

If we have concerns about your business we may grant approval but with specific conditions. The conditions will address those concerns.

We’ll advise you of our decision and outline the conditions or restrictions, giving you enough time to put systems and processes in place to meet them.

Once we’re satisfied these concerns have been addressed, we’ll remove the conditions from the approval. If these concerns are not addressed to our satisfaction we may revoke your approval. You’ll be told about our decision in writing and have the right of appeal.

You can ask us to review conditions or restrictions on your approval if your circumstances change.

You must start dealing in controlled oil within 6 months of the date of your approval. If not, we’ll consider that you do not have a genuine business need to be approved and will cancel your approval.

4.6 Changes affecting your approval

This paragraph has the force of law.

As a registered dealer in controlled oil, you must tell the Mineral Oils Relief Centre in writing within 30 days of any change to the information you provided in both:

• your application form
• supporting business plan

This is a legal obligation, imposed under Regulation 5(1) of the Hydrocarbon Oil (Registered Dealers in controlled Oil) Regulations 2002.

You must tell the Mineral Oils Relief Centre at morcapprovalsteam@hmrc.gov.uk if any information contained on your registered dealer in controlled oil approval letter or in your application form changes.

a) You’ll have to complete a new HO4 application form if the status of your business changes, for example where:

• a sole proprietor becomes a partnership
• the approved entity is transferred to another business which is not an approved RDCO
• your VAT number changes
• directors of the company change in their entirety from when you were originally approved

or

b) You must advise the Mineral Oil Reliefs Centre if any information contained on your RDCO approval letter or in your application form changes. For example if there is a change in, or addition of:

• a director of the company, where this does not change the status of your company as outlined in a)
• trading name
• premises you supply from, including adding or closing sites
• controlled oil types you supply, except any specifically covered by a restriction we have placed on your approval
• your company becomes registered for VAT, for example — where you have reached the threshold to register for VAT

We’ll update your records and amend your approval if there is any change to the information given in your application.

You can contact the Mineral Oils Relief Centre at morcapprovalsteam@hmrc.gov.uk.

You must also tell us immediately if any key personnel are under investigation, charged, or receive a criminal conviction for any offence relating to:

• dishonesty
• fraud
• terrorism
• organised crime

However, we’ll not automatically approve the new applicant or amend your approval until both of the following apply:

• we have carried out the checks set out in paragraph 4.2
• we are satisfied that the changes do not affect your status under our fit and proper test as detailed in paragraph 4.3

We’ll notify you of our decision in writing as per paragraph 4.4.

If you’re uncertain whether the change needs a new approval or an amendment you should contact the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk.

If you do not tell us about changes affecting your approval within 30 days, we’ll consider you’ve failed to meet your obligations as a registered dealer in controlled oil and may act against you. We’ll take the nature and date of the changes and the extent of any risk to tax revenue into account when deciding the appropriate action to take.

4.7 Time limits on your approval

The approval is open-ended until it is cancelled by you, if for example you stop trading or stop dealing in controlled oil or is revoked by us.

4.8 Approvals cancelled

Approvals can be cancelled either at your request, because you stop dealing in or selling controlled oil, or because we think it’s necessary. Read section 8 ‘Action taken if you fail to meet your obligations as an RDCO’ for more details.

If you stop dealing trade in controlled oil, you must inform us immediately (within 7 days), telling us how you plan to dispose of your stocks of controlled oil within 30 days, read paragraph 4.9.

Revocation of approval

We may revoke your approval if you persistently fail to:

• meet the requirements of the scheme
• meet your obligations under the scheme
• submit HO5 returns on time
• improve compliance in response to warning letters
• pay penalties arising from these failures

If this happens we’ll tell you in writing that we intend to revoke your approval, giving our reasons and giving you an opportunity to respond. Read paragraph 6.5 and section 8 ‘Action taken if you fail to meet your obligations as an RDCO’.

We’ll also cancel your approval if:

• you tell us, or we find out that, you’ve stopped dealing in controlled oils
• you have not started dealing in controlled oils within 6 months from the date of your approval — read paragraph 4.5
• we consider you no longer have a legitimate business need to be approved as a registered dealer in controlled oil

We’ll tell you in writing of our intention to cancel your approval. You will not be allowed to receive or distribute controlled oils after your approval has been cancelled, except in pre-packaged containers not exceeding 20 litres.

Immediate revocation of approval

We may revoke your approval with immediate effect where we consider it’s necessary to protect tax revenue. For example, immediate revocation could happen as a result of the following circumstances.

1. If we have reason to believe your business represents an immediate, significant risk:

   • because you’ve neglected or ignored your obligations when supplying controlled oils
   • due to a serious breach or a continued disregard for your obligations

2. If we have evidence that you’ve been involved in or have facilitated the misuse of controlled oil or any other tax fraud. In such cases, we may also prosecute you.

3. If we’re no longer satisfied that you’re fit and proper to hold a registered dealer in controlled oil approval as a result of:

   • any new information that comes to our attention
   • new information you’ve shared with us

Read paragraph 4.3 Fit and proper test.

4.9 How to dispose of controlled oil stock if your approval is cancelled

Where your approval has been cancelled at your request because you’ve stopped dealing in controlled oils, you should complete form HO83 to cancel your registration.

You can complete the form online, request one by email or by phone from the excise enquiries helpline.

You’ll need to give details of how you intend to dispose of any controlled oils you have in stock when you stopped trading. We need to agree how these should be disposed of.

Where HMRC has revoked or cancelled your approval you should follow the instructions in your letter informing you of our decision. You must dispose of your stock no later than 30 days after your RDCO approval is cancelled.

5. Supplying or selling controlled oil

The Registered Dealer in Controlled Oil Scheme was introduced to support the UK Oils Strategy with the aim of identifying and tackling commercial oils fraud. Our aim under the scheme is to work in partnership with honest distributors to improve our control of the supply chain for controlled oils and to protect the legitimate trade.

Missing or incorrect data inhibits our risk analysis of supplies and our ability to target potential fraudsters. So it’s essential that RDCOs provide HMRC with accurate and timely information on the types and quantity of oil they supply.

We also encourage distributors to take sensible and reasonable steps to minimise the chance of controlled oil being obtained by those intent on commercial scale laundering or misuse. The key to the success of the scheme to date is good communication and co-operation between HMRC and business.

5.1 Important information

Paragraph 5.2 has the force of law under either the:

• Revenue Traders (Accounts & Records) Regulations 1992
• Regulation 8 (2) of the Hydrocarbon Oil (Registered Dealers in Controlled Oil) Regulations 2002

5.2 RDCO obligations when supplying controlled oil

This paragraph has the force of law.

As a registered dealer in controlled oil, you must take every reasonable precaution to make sure that your supplies of controlled oil (as defined in paragraph 1.4) are only to:

• another registered dealer in controlled oil
• a person who will use that oil in an excepted machine in the UK, as permitted by the law, as a condition of allowing the rebate

This is a legal obligation, imposed under Regulation 8 (2) of the Hydrocarbon Oil (Registered Dealers in Controlled Oil) Regulations 2002.

If HMRC considers that you have failed in that obligation, they can take enforcement action against you. This could include:

• a warning letter
• a variation of the conditions of your approval
• the withdrawal of your approval
• civil penalties
• prosecution

5.3 Your responsibility to supply controlled oil only for legitimate purposes

Controlled oil may only be used for purposes allowed by law for the type of oil. It’s illegal to use any controlled oils as fuel for a road vehicle. Only vehicles, vessels and other machines which are specifically excepted from the vehicle requirement to use fully duty-paid fuel may be fuelled with red diesel or rebated biodiesel.

Marked rebated kerosene may only be used for heating.

You must take all reasonable precautions to supply controlled oils only for legitimate uses or to other approved dealers (RDCOs) and not to supply:

• any type of controlled oil for use as fuel in a road vehicle or other vehicle, vessel, machine or appliance that is not an excepted machine
• marked rebated kerosene or avtur for use in an excepted machine or as fuel in an engine (other than to provide heating)
• avtur (unmarked rebated kerosene) for use other than in an aircraft
• controlled oil to be mixed with any oil on which no rebate has been allowed
• controlled oils with different duty rates to be mixed with each other
• marked controlled oils for the designated chemical markers or dye to be removed
• marked controlled oils for other substances to be added to try to prevent the chemical marker being identified
• marked controlled oils for use in, or supply to, other jurisdictions where their use is not allowed

We’ll act against you and may decide to revoke your approval if we consider you have either:

a) failed to take all reasonable precautions in making a supply or supplies

b) supplied controlled oil in circumstances where you knew, or should have known, that the buyer intended to put it to any of these illegal uses

For more information about the supply of marked rebated oils including eligible uses, read :

• Using rebated fuels in vehicles and machines (Excise Notice 75)

• Motor and heating fuels general information and accounting for excise duty and VAT (Excise Notice 179).

You should make sure that you’re aware of the requirements in these notices.

The following is what HMRC regards as reasonable precautions.

Your processes and systems

Your management, marketing, business processes and systems (for example, ISO 9000), operating, training procedures and practices must be robust.

You must make it clear to your customers what kind of controlled oil they’re buying and the restrictions which apply to the use of these fuels, for example:

• partially rebated marked fuel (red diesel or biodiesel) must not be used in any vehicle, vessel, machine or appliance that is not an excepted machine
• fully rebated marked kerosene must not be used other than for heating fuel, kerosene supplied for any other use is liable to duty at the rebated diesel rate
• avtur must only be delivered for use in aircraft engines

The requirements for rebated fuel substitutes for diesel and kerosene are the same as for the type of fuel they are a substitute for.

Your labelling and marketing of these products must be perfectly clear on these points.

You must make it clear to your customers what kind of fuel they’re buying, and the restrictions that apply to rebated fuels.

If you sell rebated fuel, you must do as follows.

1. Display a clearly visible information poster in a prominent place on your business premises that is easy to read.
2. Ensure the information you put on your websites and other forms of marketing is accurate and not misleading.

3. Include your registered dealer in controlled oil approval number on your invoices.

4. Clearly show on your website that you are approved by HMRC as a registered dealer in controlled oil. Your website might state “As a supplier of partially or fully rebated fuels [my company name] is approved by HMRC as a registered dealer in controlled oil”.

Kerosene-based products have been marketed as ‘gas oil’ which could lead to illegal motor fuel use. These products should be marked in accordance with the marking requirements for kerosene. For all supplies of fully rebated marked kerosene, your invoices must bear the statement:

Not to be used as road fuel or as fuel for any other engine, motor or machinery.

For supplies of kerosene in excess of 250 litres, you must also give your customer a delivery note bearing the mandatory statement — read paragraph 5.6.

If you deal in rebated marked gas oil, you must display a red diesel poster in a prominent place on your business premises where it is clearly visible and easy to read for anyone intending to buy red diesel

The poster must be a minimum of A3 size (297mm x 420mm) and must bear the following information:

Fuelling and using red diesel in a vehicle or machine other than an excepted machine is illegal. If you’re caught you could lose your vehicle or machine and face a heavy penalty. If you have information or encounter a crime involving the illegal use of red diesel, report tax fraud or avoidance to HMRC.

If you do not display the poster to our satisfaction, we’ll treat this as failing to meet your obligations as a registered dealer in controlled oil.

Checks on your customers

You must carry out appropriate checks on all your customers and be accountable for all of your supplies to them. Your checks must be enough to satisfy you of a customer’s integrity and that they either:

• intend to use the oil supplied to them for a lawful purpose
• are approved by us to deal in controlled oils

In addition to the standard checks described in paragraph 5.16, you must consider the following particulars and assess whether they are lawful and consistent with each other.

1. The nature of the customer’s business.
2. The nature of the controlled oil being supplied. For example, avtur may only be delivered for use as fuel in aircraft engines (read Aviation turbine fuel (Excise Notice 179a)).
3. The duty status of the controlled oil being supplied. In the case of partially or fully rebated fuels, you must be satisfied that your customer’s intended use of the fuel is permitted. As an example, kerosene is liable to duty at the gas oil rate unless supplied for heating fuel.
4. The volumes and frequency of your supplies to them.
5. The details of the movement, including the means of transport or collection, the route and the place of delivery.
6. The payment arrangements and conditions.

You must make sure your staff are sufficiently trained to recognise and report suspicious matters to us.

If you suspect fraud, share your suspicions by reporting tax fraud or avoidance to HMRC, online or by telephone.

5.4 Storage of controlled oils

It is a condition of your approval as an RDCO that you must keep all controlled oil in secure storage at the premises listed in your approval and be able, on request, to satisfactorily account for all oil that you buy and sell.

We’ll act against you and may decide to revoke your approval if we consider you’ve not complied with any of these requirements.

In addition, you must comply with the following:

1. Tell us if you want to store oil at any other sites, as explained in paragraph 4.6.
2. Keep supplies of fully duty-paid fuels apart from controlled oils,
3. Take all reasonable steps to avoid mixing fuels taxed at different duty rates. This includes flushing out any tank reassigned from storing rebated fuel to storing fuel taxed at the full rate to remove all traces of markers.
4. Display an indelible notice on any drum, storage tank, other container, or any delivery pump, for red diesel, marked biodiesel, kerosene or avtur. The notice must clearly state that it must only be used in an excepted machine, as set out in Excise Notice 75.

5.5 Delivery systems

There are 2 main delivery systems employed when delivering fuel from a tanker — dry line and wet line.

Wet line delivery systems have been around for many years but the nature of the delivery system causes an issue of potential fuel contamination. Wet line contamination involves the cross contamination of road fuel with rebated fuels, which will either be red diesel or kerosene. The wet line contamination guidance covers the wet line metering system in use for trade and how to avoid contamination.

5.6 Delivery note statements

For all supplies of red diesel and avtur, and supplies of more than 250 litres of marked kerosene, you must give your customer a delivery note, which must show the appropriate statement, as follows:

Controlled oil	Delivery note statement
Marked gas oil (red diesel) or marked biodiesel	This fuel is not to be used as road fuel for a road vehicle, off-road vehicle, vessel or any other machinery that is not an excepted machine.
avtur	Delivered duty-free as fuel for aircraft engines only. Customs’ permission must be obtained before diversion to alternative use.
Marked kerosene	This oil is not to be used as fuel for a road vehicle, off-road vehicle, vessel or any other machinery that is not an excepted machine.
Fuel substitutes for use in excepted diesel and kerosene machines	This fuel is not to be used as fuel for a road vehicle, off-road vehicle, vessel or any other machinery that is not an excepted machine.

Read paragraph 5.3 for the statement you should put on your delivery notes for supplies of rebated, marked kerosene.

5.7 Retaining records of supplies of controlled oil

Regulation 6 of The Revenue Traders (Accounts and Records) Regulations 1992 requires information to be recorded.

The records you must keep will be determined by the nature of the supply.

This information, as shown in the table, should be retained in the normal business records, but you’re not expected to keep it in a central or dedicated file.

Supply	Information to be retained in your records
Supplies made in pre-packaged containers not exceeding 20 litres.	No additional records beyond those held for the purpose of conducting the business.
Supplies made directly to commercial ships and other marine vessels, excluding private pleasure craft — read paragraph 5.9 and paragraph 5.10.	No additional records beyond those held for the purpose of conducting the business. Delivery notes complying with the requirements of Relief from fuel duty for marine voyages (Notice 263).
Supplies made to another approved RDCO.	name of customer delivery, invoice address customer’s RDCO approval number, and quantity by type of oil supplied.
Supplies made to domestic end-users, for example, for use in heating private dwellings.	name of customer delivery address quantity of oil or kerosene supplied, and whatever information is already retained to identify that the customer is domestic
Marina supplies, forecourt supplies and RDCO or distributor yard supplies.	—
(i) Supplies of any quantity made directly into the tank of a boat.	No additional records beyond those held for the purpose of conducting the business, but see (iv). Delivery notes must comply with Regulation 13 of the Hydrocarbon Oil (Marking) Regulations 2002.
(ii) Other supplies not exceeding 100 litres.	No additional records beyond those held for the purpose of conducting the business. Delivery notes must comply with Regulation 13 of the Hydrocarbon Oil (Marking) Regulations 2002.
(iii) Supplies exceeding 100 litres.	The following information is mandatory: name of customer customer’s address terms of payment quantity by type of oil supplied customer’s stated use customer’s VAT number if VAT registered — read paragraph 5.11. controlled oil is collected rather than delivered directly into the tank of a boat; you should record the customer’s vehicle registration number.
(iv) Supplies to private pleasure craft	Read Fuel used in private pleasure craft and for private pleasure flying (Excise Notice 554).
All other (bulk) supplies (delivered other than in portable containers, an example being a tanker-load).	name of customer customer’s address invoice address customer’s phone number read paragraph 5.11 customer’s VAT number if VAT registered — read paragraph 5.10 terms of payment if appropriate, delivery address — read paragraph 5.10 if collected, customer’s vehicle registration number; or bunkering or fuel card details quantity by type of oil supplied; and customer’s stated use.

There are some additional record-keeping requirements in respect of supplies of avtur. Read Aviation turbine fuel (Excise Notice 179a), paragraph 4.6 for more information on these.

Where we identify areas of non-compliance such as poor record keeping, we may impose conditions on your approval. We may need you to keep and provide additional information to us. We’ll write to you about any such conditions, and the date we’ll review them. You will need this information to complete your returns — read section 6 ‘Returns’. You must make your records available to our officers on request.

There may be General Data Protection Regulation (GDPR) implications for registered dealers in controlled oils because of the obligation to record and keep customer information. For advice on how GDPR affects your business, contact the Information Commissioner’s Office (ICO).

5.8 Definition of ‘domestic supplies’

Supplies are for domestic use only if they’re for use in a dwelling or certain type of residential accommodation (excluding hospitals, prisons or similar institutions, hotels or inns or similar establishments). Examples are:

(a) armed forces residential accommodation

(b) caravans

(c) children’s homes

(d) homes providing care for:

• the elderly or disabled
• people with a past or present dependence on alcohol or drugs
• people with a past or present mental disorder

(e) houseboats

(f) houses, flats or other dwellings

(g) hospices

(h) institutions that are the sole or main residence of at least 90% of their residents

(i) monasteries, nunneries and similar religious communities

(j) school and university residential accommodation for students or pupils, and

(k) self catering holiday accommodation

The following are treated as part of the same residential unit:

• buildings such as garages used with houses
• subsidiary buildings situated a short distance away, such as a garage in a block located away from a house
• corridors, lifts, hallways and stairways in a residential unit

While we separate ‘domestic’ supplies and supplies for ‘non-commercial electricity generation and heating’ on the RDCO returns, rebated fuel can be supplied and used for both purposes.

Read Using rebated fuels in vehicles and machines (Excise Notice 75) for further information.

5.9 Definition of ‘commercial ships and other marine vessels’

Commercial ships and other marine vessels include:

• foreign-going commercial vessels
• coasting vessels
• UK fishing boats
• foreign-owned fishing boats refuelling in the UK
• ferries, lighters, pilot boats, tugs, tenders and other similar vessels
• certain safety, rescue vessels
• vessels undergoing trials
• hovercraft
• passenger vessels used for pleasure trips

You can find more information about supplies made to ships other than private pleasure craft in Relief from fuel duty for marine voyages (Notice 263).

5.10 Definition of ‘private pleasure craft’

Private pleasure craft is defined as ‘any craft used by its owner or the natural or legal person who enjoys its use, either through hire or through any other means, for other than commercial purposes’.

For information about supplies to private pleasure craft read Fuel used in private pleasure craft and for private pleasure flying (Excise Notice 554).

5.11 Definition of a ‘road vehicle’

A road vehicle is defined in Section 27(1) of the Hydrocarbon Oil Duties Act 1979 as ’a vehicle constructed or adapted for use on roads, but does not include any vehicle that is an excepted machine.

Section 27(1) defines an excepted machine as a vehicle, vessel, machine or appliance that is of a description given in Schedule 1A of the Hydrocarbon Oil Duties Act’.

Schedule 1A contains the categories of excepted machines and how they qualify to use marked rebated gas oil (red diesel). A list of these categories can be found in Section 8 of Using rebated fuels in vehicles and machines (Excise Notice 75).

5.12 Information to be obtained from your customers

We recognise that some information will not be relevant to certain customers and, therefore, you’ll not be able to give it. There may also be instances where your customer is unable to readily provide certain information.

Information	Action taken
VAT registration number	If your customer is not VAT registered, simply note the fact. If you’re dealing with a new customer who does not have their VAT number readily available, we’ll not need you to insist upon the customer producing it at that time. You should ask the customer to supply it as soon as possible. For new customers, we expect you to hold this information by the time of the third delivery. Where deliveries are few and far between, we would expect the information to be held earlier than this. If you do not get the customer’s VAT number within a reasonable period, this may result in a penalty for failure to meet your obligations, particularly if you continue to supply them.
Phone number	If you do not hold a customer’s phone number as part of your normal business practice, we will not insist that you get it for our purposes. However, if a customer only gives a mobile phone number, you should consider this along with other indicators under paragraph 5.17 in deciding whether to make a supply.
Postcode of delivery	If your customer does not have a postcode, for example, because the address is a building site, you should note your records accordingly. If you’re dealing with a new customer who does not have their postcode readily available, you do not have to insist upon the customer producing it at that time. You should ask the customer to supply it as soon as possible. For new customers, we expect you to hold this information by the time of the third delivery. But where deliveries are few and far between we would expect the information to be held earlier than this. If you do not get this information within a reasonable period, this may result in a penalty for failure to meet your obligations, particularly if you continue to supply them.

Special provisions apply to supplies to private pleasure craft, read Fuel used in private pleasure craft and for private pleasure flying (Excise Notice 554).

5.13 Incorrect or false VAT numbers

We’ll check the validity of VAT numbers. You’ll have no responsibility for making sure that VAT numbers are correct. However, if it’s incorrect or false we’ll need to contact you to get other details about the customer from your records.

5.14 Customers who refuse to supply information

As a registered dealer in controlled oil, you have an obligation when selling or delivering controlled oil. You must therefore take all reasonable precautions and exercise reasonable care to make sure that you only make supplies to customers who have a legitimate use for that oil. The registered dealer in controlled oil’s obligations are covered in more detail from paragraph 5.2.

The failure of customers to give requested information could be an indication that the customer intends to misuse the oil.

Although it’s your decision whether you make the supply, you should bear in mind that without this information you’ll not be able to comply with your obligations to us. You will not be able to undertake checks to satisfy yourself that the customer will not misuse the oil either. You may, therefore, leave yourself open to penalties.

We have produced a leaflet for the benefit of end-users explaining that they will need to provide you with certain information in order to obtain controlled oils. A copy of this leaflet is reproduced at section 9.

5.15 Discharging your obligations

Merely recording this information does not discharge your obligations.

Although gathering the information will provide some of the material necessary upon which to make a judgement about the integrity of the supply, you’ll still need to make that judgement.

This means that under Regulation 8 (2) of the Registered Dealer in Controlled Oil Regulations 2002, you must carry out the checks in paragraph 5.16 appropriate to your supply to satisfy yourself that the customer, and stated use of the oil, is legitimate.

5.16 Standard checks to be made on your customers

There are several checks that you probably already undertake in line with good commercial practice, such as credit checks and checks on whether the customer is a business or domestic user.

However, you must perform the following checks in order to satisfy us that you have taken reasonable steps to make sure the legitimacy of the supply. You should read this in conjunction with paragraph 5.17, which gives identifiers of suspicious end user.

The standard checks

Nature of supply	Standard checks	Frequency
Supplies made in pre-packaged containers not exceeding 20 litres.	None.	Not applicable.
Supplies made directly to commercial ships and other marine vessels, excluding private pleasure craft.	Delivery driver’s written confirmation on delivery note that fuel supplied direct to the vessels. This check does not apply where oil is delivered into a storage tank for later transfer to vessels. These supplies are to be treated in accordance with the instructions in ‘All other bulk supplies’.	Not applicable.
Supplies made to another approved RDCO.	Interrogate our secure internet site rebated oils excise services to confirm customer details or call the excise enquiries helpline. You may also wish to record details of the call. If supplies are picked up: mark the vehicle registration number on the copy load ticket.	If new customer, always check before making supply. If a confirmed RDCO and supplies continue, check regularly to confirm approval has not been withdrawn. It is for you to decide how frequently to check your customers approval. However, as described in paragraph 5.3, if you supply controlled oil to someone who is not approved by us, we may take action against you if we consider you have not taken all reasonable precautions when making the supply. We therefore recommend you carry out this type of check at least quarterly. Every time delivery is made.
Supplies made to domestic end-users for supplies not exceeding 3,500 litres individually or 10,000 litres over a 12-month period.	Report to manager if driver suspects property is not domestic. Read paragraph 5.21 for further information about checks to be carried out by your staff.	Every time delivery is made to a site that appears to be misdescribing itself as a domestic location.
Supplies to domestic end-users exceeding 3,500 litres individually or 10,000 litres over a 12-month rolling period.	Report to manager if driver suspects property is not domestic.	Every time a delivery is made to a site that appears to be misdescribed as a domestic location.
Marina supplies, of any quantity made directly into the tank of a boat.	Check and provide written confirmation in records that the oil is delivered directly into the tank of a vessel.	Every time delivery is made.
Forecourt, distributor yard or other supplies made through pump or similar dispenser not exceeding 100 litres.	Make sure the customer does not put the oil directly into a road vehicle.	Every time delivery, supply is made.
Forecourt, distributor yard or other supplies made through pump or similar dispenser exceeding 100 litres.	Make sure the customer does not put the oil directly into a road vehicle. Vehicle registration number. For record-keeping requirements, read below this box.	Every time delivery, supply is made.
Bulk supplies to local authorities and public bodies.	No checks required.	Not applicable.
All other supplies exceeding 100 litres.	Check the oil is not put directly into a road vehicle. Tell us of any suspicions immediately. Read also record-keeping requirements below this box.	Every time delivery is made.

Special provisions apply to supplies to private pleasure craft, read Fuel used in private pleasure craft and for private pleasure flying (Excise Notice 554).

This paragraph has the force of law.

For forecourt or distributor yard supplies, made by pump or similar dispenser in excess of 100 litres, under Regulation 6 of the Revenue Traders (Accounts and Records) Regulations 1992, you must record :

• the customer’s name
• name of person entering the details (if different)
• contact details
• transaction date
• vehicle registration number
• usage of the oil and date the last usage was checked.

For all other supplies exceeding 100 litres you must record the customer name, contact details, transaction date and usage of the oil.

5.16.1 Unattended sites

If you operate, or plan to operate one or more unattended sites, including a fuel card system from unattended sites, you must tell HMRC. You must also be approved as a registered dealer in controlled oils and able to meet your obligations as detailed in paragraph 5.2.

All registered dealer in controlled oils must be able to satisfy us that they have effective controls in place to make sure only people with legitimate use for rebated fuel are able to obtain it.

We’ll only add unattended premises to your registered dealer in controlled oils approval if we’re satisfied you have effective controls in place.

Where customers are granted access to an unattended site, for example by issue of a key, electronic card or fob, or access code, you must be able to ensure that this access cannot be shared with other parties.

On unattended sites, the person responsible for carrying out required customer checks is the one who:

• makes the final supply of controlled oil to the end user
• receives payment, including by debiting a pre-paid fuel card balance

This person must either:

• carry out the required checks on their customer and their intended use of rebated fuel
• ensure that all the required checks are carried out effectively

A registered dealer in controlled oil running a fuel card operated site is responsible for all checks on fuel card use. The RDCO must make sure that:

• they only issue cards to people with a legitimate reason to buy rebated fuel
• all cards used on their site are by people with a legitimate need
• their third party card provider is only issuing cards to people with a legitimate need

These checks include but are not restricted to the standard checks at paragraph 5.15. You must be able to satisfy yourself that the customer and stated use of oil is legitimate before fuel is removed from an unattended site.

The use of CCTV will only satisfy this requirement if it’s being monitored in real time and supply can be withheld if necessary.

CCTV recordings that can only show who obtained the fuel after it has been supplied do not provide an acceptable level of control. This is because they do not prevent someone with no eligible use from accessing rebated fuel.

If an operator of an unattended site is unable to meet their obligations to our satisfaction, we may refuse their application for approval. We may also either :

• apply conditions or restrictions to a new or existing approval,
• consider revoking an approval where our guidance and sanctions have failed to resolve the situation

We’ll advise you of our decision in writing.

5.17 Indicators to identify suspicious use of rebated fuel

This paragraph has the force of law.

There are circumstances which could give rise to suspicion that a customer ordering rebated fuel may be intending to misuse it. You should:

• record any concerns you have
• share your concerns with your staff (including those delivering the fuel)
• consider whether it is appropriate to supply the fuel

HMRC has produced a checklist for identifying suspicious supplies when fuel is ordered, or when it is delivered to the customer.

If any of the reasons for significant concern or a combination of reasons for possible concern are present at the time of ordering or delivery, you must report the facts to HMRC, in accordance with Regulation 9(2) of the RDCO Regulations 2002 . Read paragraph 5.23 for more information about reporting suspicious supply or use.

Section 8 Action taken if you fail to meet your obligations as an RDCO outlines the action we may take if you fail to meet this obligation of your RDCO status.

Checklist of suspicious supplies

The following indicators of suspicious supplies have been endorsed by the United Kingdom and Ireland Fuel Distributors Association (UKIFDA).

If you’re a RDCO, to meet your obligations under the scheme you must make your staff aware of these indicators before they take orders or make deliveries.

Significant concerns at the point of ordering include:

• email address given is not a company address or does not match the name of the business placing the order
• name of company and business activity does not match the claimed permitted use (there may be credit related issues or other reasons for this, but these must be documented)
• new customer with an apparent lack of concern with product price
• a company that sells rebated fuel does not have an RDCO number, or other evidence to show they hold a valid approval to deal in controlled oils
• delivery required away from main site without a reasonable explanation
• delivery address is changed after the order is made without a reasonable explanation
• payment to be made by someone other than the recipient
• request for an unusually large volume of gas oil, HVO or biodiesel to a domestic address or other non-industrial site
• request for gas oil and kerosene to be delivered into the same tank and the customer cannot confirm that this will only be used for heating
• request for a rebated fuel to be delivered into a tank that is not correctly labelled (for example, a tank labelled ‘Diesel’) — read Section 8 of Excise Notice 179 for more information
• sudden large increase in volumes of rebated fuel purchased by an established customer without a plausible reason
• volumes that appear to be excessive for the claimed legitimate use — for example, large or frequent orders of kerosene during summer months
• frequency of repeat orders which are not consistent with claimed legitimate use — for example, a repeat order placed when volume previously delivered could not realistically have been used for the stated purpose
• large quantities of rebated fuel ordered by a customer whose legitimate use for it has ceased or is due to cease
• aggressive or evasive responses to requests for more information on intended use or any other details relating to the supply

Possible concerns at the point of ordering include where a customer:

• gives only a mobile phone number for contact, with no other details such as email, home or personal addresses provided
• offers full payment in advance of delivery as an incentive to supply
• asks to pay in cash

Significant concerns at the point of delivery include:

• evidence or suspicions of illicit activities such as fuel mixing or adulteration, for example fuel laundering — such as traces of solid or liquid residues noticeable at, or around, the site
• inappropriate product for the apparent site requirements, such as, but not restricted to:
  • rebated fuel delivered to domestic premises without an appropriate heating system or generator
  • changes in the delivery address from that on the order invoice
  • requests for rebated fuel to be delivered into the back of vans, interconnected tanks, poor quality tanks, incorrectly labelled tanks, or temporary storage, for example static road tankers or IBCs
  • rebated fuel delivered to a construction site, plant or haulage company, garage, scrap yard or other site with no apparent equipment used for legitimate purposes
  • avtur to a buyer with no apparent reason to use it in an aircraft
• sites occupied by the operator of vehicles, machines or appliances with no apparent legitimate entitlement to use rebated fuel, or subject to frequent visits by users of such vehicles, machines or appliances
• delivery into one or more large drums or IBCs

Possible concerns at the point of delivery include:

• nervous or unusual behaviour by people on site, possibly with excessive site security for the type of business
• indications of frequent or multiple deliveries by other suppliers at the location
• delivery of rebated and non-rebated fuels required into adjacent tanks
• delivery into non-standard or adapted tanks, for example tanks without a draw-off point at the bottom

Suspicions, or confirmed suspicions, must be reported to all concerned colleagues. Under no circumstances should they be made apparent to the customer.

5.18 What you should do if you have suspicions about a customer

The standard checks necessary to meet your obligations in the supply of controlled oil are set out in paragraph 5.16. However, despite the precaution of standard checks being followed, there will be some occasions where circumstances give rise to suspicion that a customer may be misusing the product. These circumstances are detailed in paragraph 5.17.

If you have any suspicions about a customer you have supplied oil to, you should tell us as soon as possible.

You can do this online at https://www.gov.uk/report-tax-fraud, or by phoning our dedicated HMRC fraud hotline on 0800 788 887.

5.19 Recording checks

If any of the indicators in paragraph 5.17 are identified after making a supply, report the facts to HMRC (read paragraphs 5.18 and 5.24) and make records of the suspicious circumstances and the action you have taken.

You must also make these records available to HMRC upon request.

This paragraph has the force of law.

Under Regulation 6 of the Revenue Traders (Accounts and Records) Regulations 1992, you must record details of all checks you have made to establish that your customers have a legitimate use for rebated fuel, in order to satisfy us that you have carried them out.

Based on the checks you have made and the existence of any indicators as detailed in paragraph 5.17, you should tell HMRC about the information that you have gathered and the reason for your decision if you decide not to supply.

5.20 Customers not entitled to receive controlled oil or using it for an improper purpose

This paragraph has the force of law

If you have either a suspicion based on the standard checks (read paragraph 5.16) or you have evidence that the customer is making improper use of the controlled oil by using it as road fuel, you have a duty as an RDCO to tell us immediately under Regulation 9 (2) of the RDCO Regulations 2002.

You’re advised not to supply a customer if you suspect that they do not have a legitimate use for the oil, under conditions imposed under Regulation 8 (2) of the RDCO Regulations 2002.

You must not supply a customer if you have reason to believe the oil will be put to a use which attracts a higher rate of duty. You should not make any further supplies to that customer until you have carried out the additional checks and have enough information to show that your cause for concern was groundless.

HMRC will act against you if you supply a customer while having reason to believe the fuel will be misused. This includes where we consider there were enough indicators for you to have had reason to believe the fuel was going to be misused.

This may include financial penalty up to 100% of the duty evaded and revocation of your RDCO approval.

5.21 Cause for concern after supply

When considering whether you have contravened the RDCO Regulations 2002 or failed to comply with conditions, restrictions or requirements (including any obligations imposed on you in paragraph 5.2), HMRC will take into account the extent to which you have followed the guidance set out in paragraph 5.16.

You will not be liable for any penalties, or other sanctions, provided that this is not a regular occurrence and you:

• tell us immediately
• obtained the information set out in paragraph 5.7
• undertook the checks set out in paragraph 5.16
• made the supply in good faith

We may, however, ask you to review your procedures.

5.22 Checks carried out by your staff

You’re responsible for your staff. You’ll need to make sure that they’re aware of the:

• rules and restrictions that apply to the use of rebated fuels
• checks that they must carry out before supplying them

As an added precaution you should consider introducing your own management checks to make sure that your staff are:

• making these checks
• exercising proper judgement when making supplies

Similarly, in cases where employees are found to have been in collusion with a fraudulent customer, you’re ultimately responsible for your employees. However, providing you tell us immediately when you become aware of the situation we’ll consider the action that you take against the employee, which may include dismissing the employee and reporting the matter to the police.

5.23 Notifying HMRC

This paragraph has the force of law.

Under Regulation 9 (2) of the RDCO Regulations 2002 you should tell us immediately of the customer’s name, address, VAT number and postcode and of the quantity and type of oil ordered when making the decision not to supply, or receiving information after supply, which casts doubt on the customer’s legitimacy.

Read paragraph 5.18 for ways of telling us about this information.

For urgent notification phone the HMRC fraud hotline.

5.24 Decisions on liability

It’s not the intention of the scheme to penalise you for genuine mistakes. In considering whether any action against you is appropriate we’ll consider:

• your overall compliance with the scheme
• the nature of the failing which led to you making the supply
• any other mitigating circumstances

Where your failings resulted from non-compliance with the scheme, for example, failure to get any of the information at paragraph 5.7 or failure to undertake any of the checks set out in paragraph 5.16, we’ll investigate the cause to establish any reasonable excuse.

If however, there are no mitigating circumstances or your failings persist it is likely that we will take escalating action such as the issue of warning letters followed by civil penalties. In the most serious cases we may also consider revocation of your RDCO approval.

Section 8 ‘Action taken if you fail to meet your obligations as an RDCO’ sets out the penalties, sanctions and guarantees.

5.25 Legal proceedings

We may, in exceptional cases, take legal proceedings against you. For example, if you were knowingly involved in the supply and misuse of controlled oil, we’ll act against you. Such action is necessarily dependent on us having obtained enough evidence against you to support a prosecution.

5.26 Customer violence

Although it is a matter for your judgement whether to supply, we would not want you to put yourself or your staff at risk. Therefore, if you do decide to supply to a customer who has threatened violence we will not hold you responsible if you have reported the incident to the police and obtained a crime reference number for your records.

5.27 Supplying a suspicious or fraudulent customer

The (exceptional) circumstances under which we may ask you to make a supply to a suspicious or fraudulent customer to assist HMRC in enforcement action are governed by strict rules. We’ll not routinely ask you to continue making such supplies, nor should you act upon any request from our staff to do so unless you’re in possession of a written agreement.

6. Returns

6.1 The need to submit returns

You need to submit returns. However, you do not need to make returns detailing:

• supplies in pre-packaged containers of not more than 20 litres
• supplies that you have made directly to ships unless you supply rebated gas oil (red diesel) to private pleasure craft in which case special provisions apply — read Fuel used in private pleasure craft and for private pleasure flying (Excise Notice 554)
• supplies of avtur

If you have stated in your application form that you only supply in any of these ways we will not send you return forms. Returns are needed for all other supplies, including nil returns where appropriate.

6.2 Return periods and submission dates

The return period will be a calendar month or, if you have received approval, 12 months. In each case the return must be submitted by the 21st day of the following month.

6.2.1 How you qualify to submit annual returns

Once you’ve been registered as an RDCO for 12 months (having submitted 12 consecutive returns) and your total throughput of controlled oils has remained at less than 10,000 litres, then you may want to apply for approval to submit returns annually rather than monthly.

You must make an application for approval using form HO4 supplement. If you want to start your annual return in a specific month then you should make sure that your application is with us by the 15th day of the previous month. For example, if you want your annual return to start in March, then your application needs to be with us by 15 February in order for us to process it in time.

6.3 Information you must supply

You’ll need to give certain information about your supplies, the level of which will depend upon their nature, as follows:

(a) domestic supplies — for supplies not exceeding 3,500 litres individually or 10,000 litres in a year, we’ll need an aggregated entry as follows:

Type of fuel	Total quantity supplied in the period (litres)	Number of customers supplied
Partially rebated fuel including kerosene (other than for heating), gas oil, HVO and biodiesel	Enter the total quantity supplied	Enter the number of customers supplied
Fully rebated fuel including kerosene (used for heating) and paraffin	Enter the total quantity supplied	Enter the number of customers supplied

Supplies exceeding 3,500 litres individually or 10,000 litres in a year should be reported at item (d).

(b) supplies made through pump or similar dispenser (includes forecourts, marinas, yard sales, fuel card supplies, and so on) — an aggregated entry:

Type of fuel	Total quantity supplied in the period (litres)	Number of individual supplies made
Partially rebated fuel including kerosene (other than for heating), gas oil, HVO and biodiesel	Enter the total quantity supplied	Enter the number of individual supplies
Fully rebated fuel including kerosene (used for heating) and paraffin	Enter the total quantity supplied	Enter the number of individual supplies

(c) supplies to other RDCOs — a one line aggregated entry per customer:

RDCO number	Type of fuel	Total quantity supplied in the period (litres)
Enter the RDCO number	Partially rebated fuel: Kerosene (other than for heating) Gas oil HVO Biodiesel	Enter the total quantity supplied
Enter the RDCO number	Fully rebated fuel: Kerosene Paraffin	Enter the total quantity supplied

(d) bulk commercial supplies and domestic supplies exceeding the de minima — an aggregated total for each customer but, different delivery addresses, per delivery address, use the Excise Notice 192: table (PDF, 55.5 KB, 1 page)

6.3.1 Annual returns

If you’ve been approved to submit annual returns, then you’ll have to supply cumulative figures for the full 12-month period covered by your return.

You’ll need to give certain information about your supplies, the level of which will depend upon their nature, as follows:

(a) domestic supplies — for supplies not exceeding 3,500 litres individually or 10,000 litres in a year, we’ll need an aggregated entry as follows:

Type of fuel	Total quantity supplied in the period (litres)	Number of customers supplied
Partially rebated fuel including kerosene (other than for heating), gas oil, HVO and biodiesel	Enter the total quantity supplied	Enter the number of customers supplied
Fully rebated fuel including kerosene (used for heating) and paraffin	Enter the total quantity supplied	Enter the number of customers supplied

Supplies exceeding 3,500 litres individually or 10,000 litres in a year should be reported at item (d).

(b) supplies made through pump or similar dispenser (including forecourts, marinas, yard sales, fuel card supplies, and so on) — an aggregated entry:

Type of fuel	Total quantity supplied in the period (litres)	Number of individual supplied
Partially rebated fuel including kerosene (other than for heating), gas oil, HVO and biodiesel	Enter the total quantity supplied	Enter the number of individual supplies
Fully rebated fuel including kerosene (used for heating) and paraffin	Enter the total quantity supplied	Enter the number of individual supplies

(c) supplies to other RDCOs — a one line aggregated entry per customer:

RDCO number	Type of fuel	Total quantity supplied in the period (litres)
Enter the RDCO number	Partially rebated fuel: Gas oil HVO Biodiesel	Enter the total quantity supplied
Enter the RDCO number	Fully rebated fuel: Kerosene Paraffin	Enter the total quantity supplied

(d) bulk commercial supplies and domestic supplies exceeding the de minima — an aggregated total for each customer or, where same customer but different delivery addresses, per delivery address, use the Excise Notice 192: table (PDF, 55.5 KB, 1 page)

6.4 How to make the returns

6.4.1 Information returns

You can submit returns using form HO5.

6.4.2 HO5 oil use codes

Box 4 of the HO5 asks you to list ‘all other supplies’, aside from domestic supplies below de minimis, supplies made via pump or dispenser and supplies to other RDCOs, in accordance with the following use codes:

Use code	Notes	Examples
1 — Non-commercial electricity generation and heating	As described — but not for domestic use (in private homes).	This includes premises used to deliver central and local government functions or acts of public administration, for example, NHS hospitals, state schools, town halls, public libraries, places of worship, premises used by registered charities for their primary purpose trading, for example, educational charity delivering education or training, museums, and independent schools.
2 — Commercial heating	For all premises.	Read notes.
3 — Agricultural use, etc. (including horticulture, aquatic farming, arboriculture and forestry)	Read Excise Notice 75 for the interpretation of these purposes, as well as examples of allowed activities.	Read notes.
4 — Vehicles used on railways	Read Excise Notice 75 for more information.	As described. This does not include trams, cooling or heating units or other equipment mounted in or on railway carriages or freight wagons, except where these draw their power from the same engine that propels the vehicle
5 — Sailing, boating and marine transport	To include fuel when used in all types of boats and marine transport, except for private pleasure craft (PPC) in Northern Ireland. Includes supplies to PPC in Great Britain on which a payment of duty for propulsion has been made. Read section 6 ‘Returns’ of this notice for more information.	As described.
6 — Community Amateur Sports Clubs (CASCs), golf courses, travelling fairs, etc	Read Excise Notice 75 for more information.	As described.
7 — Domestic — exceeding 3,500 litres per supply	As described — by ‘domestic’ we mean private home.	As described.
8 — Domestic — exceeding 10,000 litres in a 12-month rolling period	As described — by ‘domestic’ we mean private home.	As described.

6.4.3 Private pleasure craft payment returns

If you supply controlled oil to private pleasure craft in Great Britain (England, Scotland and Wales), payment returns should be submitted manually.

6.5 What happens if you submit inaccurate or late returns

There are civil penalties for failure to submit returns on time and for making false or incorrect declarations. Persistent lateness or non-submission of returns may result in the withdrawal of your registered dealers in controlled oil (RDCO) approval.

These sanctions are subject to the appeal provisions contained in the Finance Act 1994. If we impose any of these sanctions we’ll offer you a review and tell you about your right of appeal.

If you disagree with the decision, you may either accept the review offer or appeal to the independent tribunal. If you accept the review offer, but do not agree with the review conclusion you’ll still be able to appeal to the independent tribunal. Read more information on what to do when you disagree with a tax decision or penalty.

You should also read Excise Notice 209: civil penalties — fixed, geared and daily, and section 8 of this notice which gives details about the sanctions we may impose.

6.6 Problems sending returns electronically

If you attempt to send your return electronically but our systems are down you’ll not be in breach of the 21 day time limit for submitting the return. We’ll tell you when the system comes back online so that you can submit the return.

7. Revenue accounts and records

7.1 General

RDCOs must keep revenue records and accounts of controlled oil that they have received and supplied. Revenue traders’ records (Excise Notice 206) contains the law and records that you must keep.

7.2 Units of quantity you must use

You must declare the quantities in ordinary (ambient) litres to the whole number.

7.3 Records you must keep

You’ll need to keep the information referred to in section 5 ‘Supplying or selling controlled oil’, in particular the details of the customers you have supplied (paragraph 5.5) and the checks that you have carried out (paragraph 5.14).

7.4 How long you must keep records

You must normally keep your relevant business records for 6 years. If, however, this causes problems contact the excise enquiries helpline. You must get our agreement before destroying any of your relevant business records that are less than 6 years old.

8. Action taken if you fail to meet your obligations as an RDCO

8.1 General

Our priority is that you understand your obligations and can comply with them and wherever appropriate we’ll assist you to do so. However, we’ll take all circumstances into account in determining the appropriate response to non-compliance and have the power to take action against you as explained in paragraph 8.3, 8.4 and 8.5. The actions described have the force of law. The sanctions and penalties in paragraphs 8.3, 8.4, and 8.5, will normally be applied in an escalating scale of action against you, depending on the nature of the contravention. In most cases we would expect that the lesser sanctions will have the effect of improving compliance, and that withdrawal of approval would be the exception rather than the rule. The scale of action we’ll take is as follows:

Stage	Action
1.	Warning letters
2.	Civil penalties (if appropriate) and assessment for duty due
3.	Withdrawal of approval

All of these stages will be well documented, and you’ll be given written notification at each stage. If you feel that you have a ‘reasonable excuse’ for any failing you should make your case in writing and we’ll take it into account in deciding whether the sanction should be maintained.

Read paragraph 6.4.1 and paragraph 6.5 on submission of HO5 returns and the sanctions applicable.

8.2 Advice and guidance

For minor irregularities, we usually offer advice to help you get things right before we consider taking any further action over a failure to comply with our requirements.

8.3 Warning letters

These will be issued where our advice and guidance has failed to resolve non-compliance or if we consider that the circumstances warrant an immediate warning. A warning letter will advise you that should there be further non-compliance with any of your obligations, we may proceed to civil penalties and, ultimately, withdrawal of approval.

8.4 Civil penalties

The penalties available to us are civil penalties of £250 for each contravention including, where appropriate, daily penalties of £20. Daily penalties will be applied from the 46th day after the original penalty was imposed if it remains unpaid.

Situations where such penalties may be imposed include failure to:

• report suspicious supplies to us (where there is a significant reason for concern or a combination of reasons for possible concern that are present at the point a customer orders, or you deliver, rebated fuel)
• submit returns by the due date
• make complete and accurate returns
• where applicable make payment of any duty due by the due date (for private pleasure craft supplies)

There is also a wrongdoing penalty for knowingly supplying rebated fuel for an illegal use, such as putting controlled oil into a road vehicle.

This can be up to 100% of the duty due.

8.4.1 Private pleasure craft

Where a business has failed to submit a return and duty payment by the required date, they will be issued with a warning to submit both the return and payment either within 20 days or they will be issued with a civil penalty of £250 or 5% of the duty due, or both, whichever is the greater amount. This could also result in an assessment being raised to recover the duty due. We’ll also consider changing the return period to monthly or quarterly, and if appropriate, revocation of your RDCO approval.

8.5 Revocation of approval

This situation is likely to arise where we’re no longer satisfied that you are a suitable person to be approved — read paragraph 4.3. Any decision to revoke an approval will not be taken lightly and will be fully supported by written evidence. In such cases, we’ll set out our reasons for refusing or revoking your approval in a letter.

8.6 Financial guarantees

We have the power to require financial security for amounts that may become due from the RDCO (by way of repayment of rebate). However, it will not be a routine requirement and will only be imposed in exceptional cases, as an additional condition, that is, where we have justified concerns about the conduct of the RDCO to the extent that we consider the revenue to be at risk.

8.7 Appeals

The penalties and sanctions are subject to the appeal provisions contained in the Finance Act 1994. If we impose any of these sanctions we’ll offer you a review and tell you about your right of appeal.

If you disagree with the decision, you may either accept the review offer or appeal to the independent Tribunal. If you accept the review offer, but do not agree with the review conclusion you’ll still be able to appeal to the independent tribunal. Read more information on what to do when you disagree with a tax decision or penalty.

8.8 Assessments to the repayment of rebate

We have the power to issue a revenue assessment to any person who:

• uses controlled oil in a road vehicle
• is the person liable for the oil being taken into a road vehicle

Providing you, as a distributor, are not involved in the fraudulent misuse of the controlled oil, you’ll not be liable for the duty involved. Consequently, we would not seek recovery of duty from you. This applies even where you may have failed to carry out any checks, although in cases of such negligence you may be liable to other sanctions such as a civil penalty or ultimately withdrawal of approval. This will be established by reference to your compliance with section 5 ‘Supplying or selling controlled oil’.

8.9 Criminal proceedings

If you’re involved in fraudulent activity in contravention of any of the relevant legislation, we’ll seek to prosecute. The extent of the evidence available will determine such action. Such proceedings may also seek to recover from your repayment of rebate. There are severe penalties for fraud including unlimited fines and up to 7 years’ imprisonment.

9. Leaflet for customers

Buying red diesel or rebated kerosene/paraffin for your own use.

Appendix A — questions and answers about the RDCO Scheme

1. Approval for plant-hire firms who supply controlled oil

Read along with Appendix B.

Approval for plant-hire firms who supply controlled oil will depend on how the fuel is supplied by them.

If fuel is supplied in the vehicle or machinery as part of the hire contract to an entitled red diesel user, this fuel is considered to have been put to a legitimate use by the hire firm. In this case, the supply is of the machinery, not the fuel. The invoice or hire contract should confirm that the vehicle or machinery is supplied with fuel, and details of its qualifying use. However the important point is how the fuel is supplied as opposed to the way the way the fuel is invoiced.

If the hire firm offers a service of supplying fuel separately, that is, not within the machinery, whether with a hired vehicle or machinery, the firm will need to obtain approval as an RDCO. This includes subsequent supplies of fuel in addition to fuel supplied in the vehicle or machinery, or supplies that exceed the capacity of the vehicle or machinery’s fuel tank. In these cases, the supply is of the fuel, and the hire firm is not the end-user of the oil.

However, if the hire includes the services of a driver or operator of the vehicle or machinery who will be in attendance for the duration of its use, the hire firm will not need to obtain approval. This is because the hire firm is the ‘end-user’ and the supply to the customer is a service, not a supply of oil. Any surplus fuel not used in the operation of the vehicle or machinery must not be supplied to the customer or any other persons, even if they have a legitimate use for rebated fuel.

2. Approval if person hiring the plant returns it to the plant-hire company with a full tank of oil sourced from their own stocks

The person will not need approval for this. The final fill of the tank in hire vehicles or machinery for return to the hire company is part of their use of the oil and not a supply.

3. Plant-hire companies dealing with oil returned in the tanks of hired-out plant

We would not expect the plant-hire company to account for the receipt of the oil in their records. When the plant is hired out again, even if to the same person, they would account for the oil supplied in the vehicle or machinery on the invoice.

4. Hire of plant and other equipment for a mixture of qualifying and non-qualifying use

Plant and other machinery may use red diesel while it is being used for an eligible purpose. However, it may not use red diesel if it is being used for any other purpose. It is the responsibility of the owner or hirer of the equipment to ensure that the correct fuel is being used. This may involve dedicating machines only for qualifying purposes, flushing out rebated fuel between uses, or using fully duty paid fuel for all uses.

Anyone using a machine for a qualifying use may legally use red diesel. If you require hirers to use fully duty paid fuel to allow it to be hired out for multiple purposes, you will need to ensure this is clearly stated in the terms and conditions of the hire agreement.

5. Approval for companies who hire out aircraft with fuel to other persons or business

Companies will need to be approved. This is to make sure that the excise duty on avtur used in private pleasure flying is correctly accounted for. Read paragraph 12.1 of Fuel used in private pleasure craft and for private pleasure flying (Excise Notice 554). Fuel used in corporate aircraft to transport a business’s own staff, directors or equipment is defined as private pleasure flying unless there is consideration for the transportation provided.

RDCO’s have an obligation to make sure they only make supplies to customers who have a legitimate use for the oil that is supplied, considering the rate of duty paid on it. This includes an obligation to collect a declaration from the purchaser if the fuel is to be used for private pleasure flying, and to inform them of the requirement to pay duty to HMRC.

6. Approval for farmers who allow contractors working on their land to fill up their vehicles from the farmer’s own stocks

If the farmer is buying the oil for their own use and occasionally allows contractors to fill up their vehicles whilst working on their land, they do not need to be approved, but they should only supply sufficient fuel for the operations being carried out on their behalf and only allow fuel to be put into vehicles that are eligible to use it. Read Appendix C for further guidance.

7. Approval for farmers who occasionally hire out their tractors to other farmers including a tank of controlled oil

If the oil in the tank was supplied to the farmer for their own use then the onward supply of that oil in the tank of a tractor when it is occasionally hired or loaned out can be disregarded as an onward supply for the purposes of the RDCO Scheme. The farmer should make sure that the tractor will be used only for purposes for which rebated fuel may be used.

However, this does not apply if the farmer is running a tractor hire business, in which case the requirement to be approved would follow the same rules as those for plant-hire companies.

8. Separate approval for individual petrol stations who supply controlled oil through a dispensing pump

If they’re owned by the same legal entity, then the approval will cover all their sites. It is important that all the sites are listed in the application form.

If they’re separately owned by individuals for example Mr (X) trading as (X) Service Station, they will need an individual approval.

9. Registered Remote Markers (RRMs) and their premises

The RDCO scheme only applies to RRMs who mark their own oil and supply on to others. If they mark on behalf of the owner of the oil they do not need to be approved as all they’re providing is a service. The owner of the oil will be the person who needs to obtain approval. In their application, they will need to include the marking premises as a site at which oil is stored.

10. Approval for buying groups, machinery rings who arrange a supply of oil on behalf of their members

Approval is not needed providing they fulfil the conditions set out in paragraph 2.2. They have an obligation to make checks on their customers before making a supply and it is for their protection that they should know who their customer is. We suggest that buying groups discuss with their suppliers the nature of the transactions to make sure that both parties agree on who the end-user is. (Read Appendix D for further information).

11. Return forms for an agent arranging a supply of controlled oil from another RDCO who delivers directly to commercial ships

The RDCO supplying the oil accounts for the transaction as a supply to another RDCO. The receiving RDCO (for example, agent) does not need to include these transactions on their return, read paragraph 6.1.

12. Supplies to domestic premises and storing controlled oil in a central storage tank situated near to the premises I supply

These must be included on the list of premises as we need to know of any sites where controlled oil is stored.

13. Approval if supplies of controlled oil are below a certain level in a 12-month period

Approval is needed. The only de minimis level for approval is for suppliers who buy and sell controlled oil in pre-packaged containers not exceeding 20 litres.

14. Approval to deal in controlled oils if you already have approval for Tied Oils.

If you are approved to deal in Tied Oils this does not mean you are covered for controlled oils as well.

The RDCO Scheme is separate from the Tied Oils scheme and, as such, you’ll have to obtain a separate approval number. This is because these schemes are dealing with two different types of oil: marked rebated gas oil and kerosene (including avtur) under the RDCO scheme and duty relieved oils used in industrial processes under the Tied Oils Scheme.

15. Treatment of supplies made through a fuel card

These are supplies where the fuel card allows the purchaser access to a pump on sites owned by the oil company. The supply is then logged like a credit card sale.

There are 2 possible scenarios:

a) The oil company owns the card and supplies the oil. The card company merely handles the administration: the oil company records these sales as an aggregated total (providing they are all made by pump) in box 2 of the return.

b) If the oil is supplied to the card company who then supply the end-user, the card company will have to be approved and report these supplies to us as at a).

In both cases, the card company records, printouts showing individual supplies are enough records for the purposes of the scheme.

Read paragraph 5.16.1 regarding arrangements for unattended sites.

16. Approval for main contractors who supply controlled oil to their sub-contractors for use on the main contractor’s site

We would view the supply between the main contractor and sub-contractor as part of the main contractor’s use of the oil providing it remains on the site where it was originally delivered. If it’s subsequently delivered ‘off site’ then we’ll regard the main contractor as being a distributor and they will, therefore, must seek approval as a RDCO and declare these supplies accordingly.

17. Treatment for supplying controlled oil to train companies

If the oil is delivered directly into the tanks of the train, this is a pump supply and would be included in box 2 of the return. Other bulk supplies would be included in box 4.

18. Treatment for supplying controlled oil from a tank on a barge

This is no different to a forecourt supply and should be included in box 2 of the return.

19. The RDCO Scheme and treatment of supplies of oil below 2,300 litres as domestic supplies for VAT purposes including commercial use

Under the RDCO Scheme you’ll have to split all supplies between domestic and commercial irrespective of the quantity delivered.

20. Hardware stores selling small quantities of paraffin and how they are affected by the scheme

Owners of hardware stores may have to be approved as RDCOs depending on the nature of their supplies:

They’re excluded from the scheme if they only buy and sell controlled oil in pre-packaged containers not exceeding 20 litres.

If they buy controlled oil in bulk and decant it into pre-packaged containers not exceeding 20 litres prior to sale, providing they only supply in this way they will have to be approved but do not need to make returns.

If they fill up a container with controlled oil at their customer’s request, this is treated as a pump supply and should be recorded in box 2 of the HO5 return.

If they decant the contents of sealed containers into a customer’s storage tank, this is treated as a bulk delivery and should be recorded in box 4 of the HO5 return.

21. Approval for hauliers contracted to transport controlled oil from an RDCO to their customers

Approval is not needed, providing they’re contracted only to transport the fuel which is invoiced from the RDCO to the customer. If the contract is with the supplying RDCO, it’s the responsibility of the supplier to make sure that the controlled oil is delivered to another RDCO or a legitimate user.

22. Approval for air ambulance operators supplying fuel to other air ambulance operators

Approval is needed. If fuel purchased for the company’s own use may be occasionally supplied to other air ambulance services, the supplying operator must be approved as a dealer in controlled oil.

If any supplies would be limited only to other air ambulance services on an ad hoc basis, this should be explained in a covering letter with your application for approval on form H04. In these circumstances, you do not need to submit a business plan.

However, if the supply of fuel will be offered as an additional commercial activity of the business, or will include supplies to other aircraft or helicopter operators, the supplying operator will have to follow fully the process in paragraph 4.1 to obtain approval as an RDCO before making these supplies.

Appendix B — Plant-hire businesses

1. Plant-hire businesses

This information note sets out the position of plant-hire businesses in relation to the RDCO scheme, as agreed with the Construction Plant-hire Association, the Hire Association Europe, the Construction Confederation and the Forklift Truck Association.

2. Background

The Registered Dealer in Controlled Oil Scheme requires that except for those businesses receiving and selling controlled oil in closed pre-packaged containers not exceeding 20 litres, and certain sales made by end-users, anyone dealing in controlled oil must be approved and registered to do so by HMRC. These rules apply equally to secondary distributors. Secondary distributors may include those whose main business activity is not necessarily that of oil distribution, such as plant-hirers. Approval and registration for the RDCO scheme does not apply to end-users of controlled oil.

3. When plant hire companies need approval

If you supply any fuel separately, that you do not put into the machinery, whether or not at the same time as a hired vehicle or machinery, you will need our approval as an RDCO. In making these supplies, you are dealing in controlled oil, and your customer is the user of the oil.

You do not need registered dealer in controlled oil approval in the following circumstances

1. You hire out or sell plant already containing rebated fuel to be used for a qualifying purpose as part of a hire or sale agreement. This includes ‘top-up’ supplies of rebated fuel that you put directly into your vehicle or machinery for its continued use by your customer.

2. The hire agreement includes providing a driver or operator for the equipment. The driver or operator must be present for the duration of the hire. Any fuel supplied, whether in the plant or separately, must be put to use only by them.

3. You arrange for fuel to be delivered directly to your customer by a registered dealer in controlled oil. You must only arrange delivery of the quantity of fuel required for the qualifying use in your plant during the hire agreement.

In these circumstances, as owner of the plant, you’re considered to be the end-user of the oil. The supply of oil you’re making to your customer is part of hiring plant, not dealing in controlled oil. Your plant hire contract or invoice must show that the hire of the equipment includes fuel. If you invoice your customer separately for any additional fuel supplied in these circumstances, your invoice must clearly refer to the plant hire agreement it relates to.

When you order oil from your RDCO supplier you should make clear that you are the end-user. The registered dealer in controlled oil will ask you for certain information such as your name, address, VAT number and what the fuel will be used for. You should provide any information requested by the RDCO to help them ensure the fuel is being used for the correct purposes.

The RDCO will make all necessary checks to satisfy themselves that the fuel you buy from them will be used in a qualifying machine for a permitted purpose, including when they deliver it directly to your plant hire customer.

If you supply fuel in any of these circumstances, any surplus fuel not used when the plant hire agreement operation of the equipment ends must not be returned to you by the customer.

4. Supplying oil as a plant hire company

There are several ways in which you may supply oil. This table shows the approval requirements for each:

Type of supply	RDCO approval needed by the plant hire company	Conditions
1. Plant supplied for an eligible purpose with an operator for duration of the hire	No	Fuel may be provided in the plant and additional supplies may also be made for its continued use by the operator. Surplus fuel must not be supplied to any persons.
2. Plant supplied for an eligible purpose without an operator, with sufficient fuel in tank for its operation.	No	Invoice or hire contract should show that the machinery has been supplied with fuel, whether the price of the fuel is included in the hire charge.
3. Oil supplied as part of a plant hire agreement to fill or top up the plant’s running tank during the hire	No	The fuel must be put directly into the plant by the hire firm unless it’s delivered directly to the plant hire firm’s customer by and approved RCDO. In either case your invoice for the fuel must refer to the plant hire agreement.
4. Oil supplied to your customer in an ancillary tank attached to the plant.	No	If you supply oil to an ancillary tank, that is, to fuel a generator, we will regard it as being the same as supplying oil in the main tank. The approval, reporting and checking requirements will be the same as those for supplies in the running tank of the plant.
5. Oil delivered by the plant hire company in addition to fuel supplied in the plant’s running tank, but not supplied directly into plant.	Yes	This is a supply of the oil, not of the plant. This includes an additional supply where plant is supplied with a full tank of fuel and any supply where the fuel is collected by the hirer.
6. Other supplies of controlled oil (outside of a plant hire agreement.)	Yes	This is a supply of controlled oil.

If your company hires in plant from another hire company for use by one of your customers, the rules relating to the supply of fuel equally apply, for example, if the plant will be supplied with fuel contained in the running tank.

5. Requirements

5.1 Supplies of oil

There are minimum requirements for supplies of oil made in one of the following ways:

a) with a piece of plant including a full time operator
b) directly in the running tank of the plant
c) when a RDCO delivers directly to your customer

These are the minimum requirements.

1. Records to be kept.

We do not require you to keep any additional records beyond those that you currently keep for the purpose of running your business. As a user of controlled oil, we may ask you to account for the use of volumes you have purchased from an RDCO, including:

• where machines have been supplied with red diesel
• that the machine was used for an eligible purpose
  

You should also keep a record of information you provide to your RDCO when ordering the fuel, whether for you to supply in your plant or to be delivered directly to your customer.

2. Checks to be carried out on your customers.

We do not need you to do any checks, although if you do have suspicions that your customer may be decanting and misusing or onward supplying the oil, we would expect you to inform us.

You should also be aware that if a customer is detected using red diesel in the machine for non-qualifying purposes, the machine may be seized.

3. Oil contained in the running tank when the plant is returned.

We do not require you to carry out any accounting arrangements or to record the return of any oil contained in running tanks. Oil returned to you in running tanks will simply become your oil in the same way as if you obtained it from a RDCO.

When you next hire out the plant for an eligible use, and even though it may contain oil that was ‘supplied’ by the person to whom you previously hired it, you should do the following:

• still treat the oil as an onward supply by yourself
• declare it in exactly the same way, without the need to make any allowance for the returned oil

4. You should ensure that equipment hired out for non-qualifying purposes do not contain red diesel.

5.2 Other supplies of oils

There are minimum requirements for oils supplied in the following way: 

a) in addition to the oil contained within the running tank of the plant
b) outside of a plant hire agreement

These supplies should be included in box 2 of the RDCO Return. These are aggregated totals of quantities supplied and the number of supplies made in the month. Unless these supplies are either by pump or to another RDCO, then they’re bulk supplies and, as such, you’ll need to comply with the rules set down in section 5 ‘Supplying or selling controlled oil’, and paragraph 6.3.

If your system has already been set up to complete boxes 3 and 4, you may do so providing you are consistent when completing subsequent returns. Nevertheless, you may want to consider changing your system so that you are only providing the minimum information required.

If your customer is picking up oil from your depot — just the oil without the plant, then you must treat this as above, as a supply outside of the plant-hire contract or agreement

Appendix C — RDCO information note — farmers

1. Farmers

This information note sets out the position of farmers in relation to the RDCO Scheme as agreed with the National Farmers Union.

2. Background

The RDCO Scheme requires anyone supplying or dealing in marked rebated gas oil (red diesel), rebated biodiesel and kerosene (commonly known as burning oil or paraffin) to be approved by HMRC. However, the scheme does not apply to those who get these oils for their own use but occasionally supply on quantities to others outside of their primary business activities. Exclusion of these transactions from the scheme is specifically provided for in the legislation. However, to assist farmers to determine whether such transactions are indeed of an occasional, non-primary business nature and, therefore, outside the scheme, we have come up with the following guidelines.

3. Occasional hire

If a farmer obtains controlled oil as an end-user for their farming activities but occasionally hires out, or loans, plant (for example, a tractor) containing oil in the running tank either to other members of a machinery ring or buying group or to their farming neighbours, then they do not need to be approved if:

• the majority use of controlled oil is for their own farming activities and not for use within the hired machinery
• they’re not clearly running a machinery-hire business
• their main income is not from hiring out vehicles
• they do not actively strive to increase this side of their business activities, for example, by advertising outside the machinery ring, buying group or current hires
• their hiring activities have no recognisable continuity, they should not occur with such frequency that they become a recognisable and identifiable activity of the farmer — basically, if a farmer is known outside their current circle of hires as someone who has plant for hire, then they will have to be approved

If a farmer can fulfil these conditions then HMRC will regard them as the end-user of all the oil they obtain and they will not, therefore, need to seek approval. The farmer should make sure the tractor or machinery will be used only for purposes for which rebated fuel may be used. If they do not fulfil these conditions, then they’ll be regarded in the same way as any other plant-hire business and will have to seek approval. If a farmer does not seek approval and their circumstances should change in any way, they must seek further clarification as to how this affects their position.

4. Returns of controlled oil in hired vehicles

If a farmer needs to be approved as a RDCO, we would not require them to carry out any accounting arrangements or to record the return of any oil contained in running tanks. Oil returned in running tanks will simply become the farmer’s oil again in the same way as if they had obtained it from their normal supplier. When they next hire out the machinery, and even though it may contain oil that was ‘supplied’ by the person to whom they previously hired it, it should still be treated as an onward supply without any allowance made for the returned oil.

Appendix D — Buying groups and machinery rings

Buying groups and machinery rings bring small businesses from the same industry together so they can place a single large order with suppliers. This is known as group purchasing. This is because suppliers tend to give better discounts for buying in bulk – the buying group then passes these savings back to its members. This allows small businesses to enjoy the discounts that are normally offered to larger organisations

Not all buying groups or machinery rings operate in the same way. How they carry out their business will determine whether they’re required to be registered for the RDCO Scheme.

A buying group or machinery ring that deals as a principal in controlled oil is required to register for the scheme. However, it need not register if it acts as an agent in the transactions.

Establishing who takes title to (in this instance, ownership of) the oil will resolve any doubts that may exist. If the person taking title is the buying group or machinery ring, they will need to register for the scheme. This is because they’re not the end-user of the oil and without an RDCO approval they will not be able to obtain oil from their supplier. The end-user of the oil is the buying group or machinery ring member (for example, a farmer).

It will be the responsibility of the buying group or machinery ring to comply with the requirements of the scheme by:

• obtaining and keeping information about the member
• making checks and including the member’s details on their return.

If the buying group or machinery ring is not taking title to the oil at any stage in the transaction, they do not need to register for the scheme. In such cases, the RDCO supplying the oil (albeit at the request of the buying group, machinery ring) will be doing so directly to the member. The buying group will not take possession of the oil at any stage. It will be the responsibility of the supplying RDCO to comply with all the requirements of the scheme by:

• obtaining and keeping information about the member (not the buying group, machinery ring)
• making checks and including the member’s details on their return.

However, if the buying group or machinery ring is not taking title to the oil at any stage in the transaction, then they do not need to register for the scheme. In such cases, the RDCO supplying the oil (albeit at the request of the buying group, machinery ring) will be doing so directly to the member and the buying group will not take possession of the oil at any stage. It will be the responsibility of the supplying RDCO to comply with all the requirements of the scheme — obtaining and keeping information about the member (not the buying group, machinery ring), making checks and including the member’s details on their return.

Arrangements between distributors and buying groups, machinery rings — we’re aware that several buying groups, machinery rings have entered into arrangements with their supplying RDCOs which override the above guidance. Some of these arrangements allow for the scheme obligations (obtaining information, carrying out checks on end-user members, and so on) to be undertaken by the supplying RDCO even though the buying group or machinery ring is acting as a principal in the transaction and should be registered and be responsible for the scheme obligations.

Other arrangements allow for the scheme obligations to be undertaken by the buying group or machinery ring even though they’re acting as an agent in the transactions and there would be no need for them to register. Provided both the supplying RDCO and the buying group or machinery ring are content with and adhere to these arrangements, HMRC will not insist on the need to follow the guidance in the previous paragraphs.

However, all parties should be aware, that whoever agrees to be responsible for the scheme obligations will require the other party to provide information about the end-users of the oil in order to allow them to discharge those obligations fully under the scheme. In particular:

a) unapproved buying groups, machinery rings should provide the supplier of the oil with all the relevant information necessary to allow the supplying RDCO to discharge their ‘duty of care’ obligations. For example, their member’s name and address, VAT number and stated use of the oil and so on.

b) RDCOs supplying oil through an unapproved buying group or machinery ring should show the individual customer they deliver the fuel to on their RDCO return but may invoice the buying group for the fuel.

c) The RDCO’s records must provide a clear audit trail between the invoice to the buying group and deliveries of fuel to members.

d) RDCOs supplying oil through an approved buying group or machinery ring should pass on any concerns they may have at the delivery point to the buying group. Any party refusing to provide this information will affect any previous arrangement entered into. As a  result, HMRC will insist that the guidance regarding approval in the previous paragraphs will have to be followed.

Your rights and obligations

Read the HMRC Charter to find out what you can expect from us and what we expect from you.

Help us improve this notice

If you have any feedback about this notice write to:

HM Revenue and Customs
Excise Fuel Duty Policy
4th Floor East
Trinity Bridge House
2 Dearmans Place
Salford
M3 5BS

Email: oils.policymail@hmrc.gov.uk

This address is not for general enquiries.

You’ll need to include the full title of this notice. Do not include any personal or financial information, like your VAT number.

If you need general help with this notice or have another question contact the HMRC Excise Helpline on 0300 200 3700, or email the Mineral Oil Reliefs Centre at morc.exciseenquiries@hmrc.gov.uk.

Putting things right

If you’re unhappy with HMRC’s service, contact the person or office you’ve been dealing with and they’ll try to put things right.

If you’re still unhappy, find out how to complain to HMRC.

How HMRC uses your information

Find out how HMRC uses the information we hold about you.

Published 17 December 2015
Last updated 7 November 2024 + show all updates

1. 7 November 2024

   We've added 3.5 Supplies of marine fuel to commercial ships and vessels which involve a dry broker not located in the UK. We have clarified sections: 2.1, 2.3, 2.5, 5.2, 5.3 and Appendix D Buying groups and machine rings. In Appendix B we've clarified when plant hire companies need approval.

2. 12 February 2024

   Section 5.26 has been updated to remove the requirement to contact the HMRC fraud hotline in cases of customer violence.

3. 31 January 2024

   The mineral Oils Relief Centre contact details have been updated and information has been added to support supplies of rebated fuel substitutes for use in excepted machines.

4. 3 April 2023

   Guidance about how to make returns has been updated.

5. 30 June 2022

   We have added a link to the contact details for the HMRC Mineral Oil Reliefs Centre in section 4.

6. 1 April 2022

   The guidance has been updated to reflect the changes to the use of rebated red diesel and biodiesel.

7. 15 September 2021

   Sections 4.4 and 8.5 have been updated with a link to apply for a temporary approval.

8. 17 December 2015

   First published.