The requirements pertaining to the entitlement and procedures for reclaiming excise duty on fuel used in vessels used to make marine voyages can be complex and prone to abuse. This article seeks to cover the reclaim position from the point of view of oil suppliers, owners, charterers, hirers and masters (or their agents) of vessels engaged in marine voyages.
The Applicable Law
· Council Directive 2008/118 (which repealed Council Directive 92/12/EEC).
· Council Directive 2003/96/EC
· The Hydrocarbon Oil Duties Act 1979
· The Hydrocarbon Oil (Payment of Rebates) Regulations 1996
· The Hydrocarbon Oil Duties (Marine Voyages Reliefs) Regulations 1996
· The Hydrocarbon Oil Duties (Marine Voyages Reliefs) (Amendment) Regulations 2010
Red diesel can be bought at quaysides, marinas and on inland waterways. Red diesel is gas oil that has been chemically marked and dyed to show that it has borne a rebated (reduced) rate of excise duty because it must not be used in road vehicles. Red diesel is much cheaper than road fuel sold at a garage forecourt, so HMRC does not expect one to claim for a refund of duty on road fuel. If one does, HMRC may delay repayment of duty on road fuel while they verify that the oil was indeed used in one’s vessel.
Where a delivery of marine fuel is made from a duty suspended or netting location, HMRC expects traders to make sure the calibration and continuing accuracy of measuring equipment. Furthermore, traders who deliver duty paid marine fuel should make sure deliveries are carried out from metered and calibrated tanks in line with requirements set by Trading Standards. There are further accuracy requirements in addition to those listed above. Furthermore, those involved in the supply of marine fuels must be registered under the Registered Dealers in Controlled Oil (RDCO) scheme. As there is no duty on either marked kerosene or lubricating oil, no claims are submitted in relation to these oils.
What is an Eligible Vessel?
An ‘eligible vessel’ is any vessel that is used on a marine voyage, including hovercraft, but not private pleasure craft. EC legislation (Article 14 (1) (C) of Directive 2003/96/EC) defines ‘private pleasure craft’ 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, and in particular, other than for the carriage of passengers or goods or for the supply of services for consideration or for the purposes of public authorities’.
So, if a vessel is used for pleasure, or it is being hired out and the hirer uses it purely for pleasure, then one cannot claim relief on the fuel used for the voyage. However, relief can be claimed for fuel used in pleasure craft in some circumstances, as will be explained in more detail in the following paragraphs.
If the vessel is a commercial vessel and it is used on a marine voyage, then it is an ‘eligible vessel’ and relief can be claimed. For example, if one of the following types of vessel is being operated, then the eligibility of claiming the relief arises on the fuel used, as long as other requirements are also complied with (outlined below):
· foreign-going commercial vessels;
· coastal vessels;
· dive boats;
· 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 - see paragraph 2.4;
· vessels undergoing trials (but not basin or dock trials whilst stationary, that is, not ‘engaged on a voyage’);
· hovercraft; and
· passenger vessels used for pleasure trips - go to paragraph 2.5.
Which oils can relief be claimed on?
Relief can be claimed on heavy oil such as gas oil or fuel oil, and light oil such as petrol which is used as fuel for the machinery of eligible vessels during a marine voyage.
What is a Marine Voyage?
A marine voyage is one where the eligible vessel is, at all times, either within the limits of a port or at sea. It does not include any part of a voyage where the eligible vessel is on inland waterways.
Relief can be claimed for any eligible vessel for:
· voyages made between a UK port and any foreign port;
· voyages made between UK ports, including a return to the same port;
· voyages where the vessel is moving from place to place within a port;
· voyages made between a UK port and a mooring at sea;
· voyages made between moorings at sea. A mooring is a structure or apparatus set out in a permanent manner to which a vessel or floating object may be secured.
Vessels moored temporarily or at anchor are still considered to be undertaking a marine voyage.
Relief cannot be claimed for any voyage made on an inland waterway which is not within the limits of a port. For example, relief cannot be claimed for fuel used on:
· a barge used on canals or inland waterways;
· a passenger vessel which takes passengers across an inland lake.
How may a safety/rescue vessel qualify for relief?
Relief can be claimed if the vessel is used solely as a safety or rescue vessel throughout the marine voyage, or if the safety/rescue function is combined with another, commercial, purpose. Relief may not be claimed if the vessel is used for pleasure at the same time as carrying out the safety/rescue function.
For example, provided that the conditions set out in this article are met, relief can be claimed for marine voyages:
· made in a vessel which is acting as a ‘declared facility’ for public authorities, (for example, the coastguard);
· where the vessel is acting as a ‘safety vessel’ for a yacht club or sailing association race or regatta, and it carries only an appropriate complement of safety-trained personnel and no other passengers;
· where the vessel is acting as a ‘safety vessel’, as above, and it also carries paying passengers for the trip.
However, relief would not be claimable for a marine voyage where the vessel is acting as a ‘safety vessel’, but where it is also carrying non-paying spectators or passengers. On this occasion the vessel is being used for pleasure purposes and therefore will not be eligible for relief.
HMRC may check a claim for relief on such voyages, and below is a list of some of the evidence HMRC may expect to find to confirm that a vessel was used as a safety or rescue vessel during the voyage:
· a safety or rescue vessel would be equipped with appropriate supplies (such as lifesaving equipment) and to carry personnel trained in marine safety and rescue techniques;
· the voyage coincided with an event or training exercise which required a safety or rescue vessel, unless routine patrol or standby duties are being carried out in a vessel such as a coastguard vessel or oil rig safety vessel;
· reference to the vessel’s safety or rescue function in the records of the organisation using it; and
· where the vessel was said to have been used for a commercial function, some evidence to corroborate that.
Is any relief allowed for vessels hired out for pleasure purposes?
The owner or hirer (charterer) of a private pleasure craft cannot claim relief. However, a business which hires out vessels may be able to claim relief even where the vessel is used for pleasure purposes. For example, as long the requisite requirements are met, then relief can be claimed on:
· marine voyages of boats used for pleasure trips carrying paying passengers; and
· marine voyages of boats hired out for diving, fishing, water skiing and so on, carrying paying passengers and/or appropriate equipment and/or providing specialised services.
Some examples of hires and their eligibility for relief are:
· if a boat with a crew is hired then relief on the fuel used can be claimed.
· if a boat is hired out without a crew and the hirer uses the boat for pleasure purposes then relief cannot be claimed on the fuel used as this would be deemed a private charter.
· the hirer or owner of a boat taking paying passengers on a diving/fishing trip can claim relief on the fuel used if this is a marine voyage.
· the hirer or owner of a boat which takes non-paying passengers on a diving/fishing trip cannot claim relief on the fuel used as the voyage is entirely for pleasure purposes.
The above list is not an exhaustive list.
Applications for re-landing heavy oil
If re-landing heavy oil is required which was purchased free of duty or on which a reclaim of duty has been made, then an application must be made in writing - demonstrating a need to do so.
Duty-free heavy oil from a duty-suspended mineral oil installation
For audit assurance purposes, warehouse-keepers must keep records of all heavy oil shipped free of excise duty in a format agreed with HMRC.
Warehouse-keepers need to retain the application and receipt for all deliveries for production to HMRC on request.
When a delivery of duty suspended marine fuel is made by an intermediary supplied by the warehouse-keeper, it is the responsibility of the warehouse-keeper to obtain evidence of how much fuel has been delivered. Warehouse-keepers and intermediaries ought to agree a means of providing HMRC with the necessary evidence of the amount of fuel delivered to a vessel.
Who may claim repayment of excise duty?
A repayment can only be claimed for excise duty which has been paid, and in respect of which no drawback or other claim has been or will be made.
A claim can be made by:
· the owner, commercial charterer or hirer or the ship’s master;
· a sole agent, if authorised in accordance with applicable HMRC guidelines;
· a supplier of the oil acting as sole agent.
The master of a vessel can authorise an agent to apply for repayment on behalf of the owner or charterer provided that written authority, as above, has been given by the owner or charterer.
How is a claim made?
A claim should be made on form HO50 - Fuel Duty: claim for repayment of Excise Duty on mineral oil used on commercial vessels.
Penalties and Appeals
If heavy oil purchased free of duty under the arrangements described above is misused or re-landed, or inaccurate or incomplete information is provided, then HMRC can prosecute and impose financial penalties, as well as seeking a repayment of the duty and VAT.
HAMMAD BAIG © 2019
33 BEDFORD ROW
The author of this article, Hammad Baig, can assist with all aspects of the law relating to this article. For instance, Hammad can assist with: (1) ensuring that the accuracy requirements are met; (2) the registration process and/or challenging any refusal to register; (3) whether a particular voyage qualifies for relief in respect to hire for pleasure purposes; (4) Applications for relanding heavy oil; and (5) claiming for Fuel Duty on form HO50. Should you require assistance in this area, then please do not hesitate to contact Hammad Baig’s clerk Mark Byrne.
NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.