| From the 1st November 2008 red diesel continues to | | | | HMRC have confirmed that VAT is charged at the |
| be available to recreational boaters albeit fuel used for | | | | reduced rate of 5% on fuel for propulsion and |
| propulsion will be subject to the full rate of duty whilst | | | | domestic use. A worked example is given below |
| fuel for domestic purposes e.g. heating, lighting etc will | | | | This example assumes a 60% (propulsion) and 40% |
| continue to be at the rebated rate. | | | | (domestic) split for a purchase of 100 litres of red |
| Boat owners engaged in commercial boat operations | | | | diesel (the price of diesel is assumed to be 0.70ppl |
| e.g. yacht charters and deliveries will continue to | | | | which includes 9.69ppl duty already paid to fuel |
| purchase fuel for propulsion at the rebated rate. | | | | supplier): |
| The new system works as follows for leisure boat | | | | Propulsion calculation (i.e. 60%) |
| owners. A written declaration is made to the vendor | | | | - 60 litres @ 0.70ppl = £42 |
| before purchase stating the percentage of marine fuel | | | | - 60 litres @ 0.4066 = £24.40 (additional duty) |
| used for propulsion the balance as a percentage for | | | | - VAT @ 5% = £3.32 |
| domestic use. HMRC and the industry suggest a split | | | | - Propulsion Total = £69.72 |
| of 60% for propulsion and 40% for domestic use, but | | | | Domestic calculation (i.e. 40%) |
| the apportionment split is purely down to the owners | | | | - 40 litres @ 0.70ppl = £28 |
| intended usage and a level of honesty is required. | | | | - VAT @ 5% = £ 1.40 |
| After all HRMC may review the situation if the system | | | | - Domestic Total = £29.40 |
| does not work. | | | | - Transaction Total = £99.12 |
| The wording prescribed by HMR&C for this | | | | Don’t forget to keep invoices on board if travelling |
| declaration is:- | | | | abroad on your boat where legislation for marine red |
| "I declare that [ ] % of the fuel purchased will be used | | | | diesel consumption can be different. |
| for propelling a private pleasure craft" and then the | | | | Overall the industry has welcomed this new system |
| owner will be asked to pay the full rate of duty on the | | | | which has helped to alleviate major worries from |
| declared proportion of the fuel purchased. The vendor | | | | leisure boat owners and the U.K. boating industry as a |
| may also have a form to complete. Once the | | | | whole. Now let’s see if both U.K. boat owners, fuel |
| declaration is made there is nothing more to do. | | | | suppliers and the HRMC can make the system work. |