HMRC conducts spot checks on marinas using and selling ‘red diesel’

There has been an increase in reports of HMRC carrying out inspections of UK marinas to check their compliance with the rules on the use and sale of red diesel since August, according to British Marine.

For example, one business, which is not a member of British Marine, was found to be breaking regulations by using red diesel for on-site plant equipment. Under HMRC rules, this is not allowed, and therefore the plant equipment was impounded.

HMRC spot checks are also being undertaken to ensure marinas are taking the necessary steps to best ensure rebated fuel is only sold or supplied to customers that have a legitimate use for it.

The increase in HMRC spot checks comes at a time when the UK has been fined €32m (£28m) by the European Court of Justice for allowing pleasure boats to use lower-tax ‘red diesel‘ in the final days of its EU membership.

EU law stipulates that only commercial boats can use the lower-tax fuel, but — by dyeing all marine fuel red — it was impossible to determine if pleasure boats in Northern Ireland were paying the full tax rate. However, the UK did not update the law governing marine fuel in Northern Ireland to comply with the EU rules until October 2021.

The ECJ said the rule had applied to the whole of the UK for almost three years since the original ruling, and it was therefore not relevant that it only applied in Northern Ireland since Brexit came into force in January 2021.

In the case of recreational (non-commercial) craft, rebated fuel should only be used for domestic use, such as onboard heating or generation of electricity, and should not be used for propulsion.

As emphasised at British Marine’s webinar in July 2023, the association urges marinas selling red diesel to consider the integrity of their customers and be familiar with Excise Notices 75, 192 and 554 so that, if necessary, they can remind their customers of the rules.

Marina customers are liable for providing marinas with accurate declaration forms, and marinas themselves should refrain from applying duty based on a 60:40 split for propulsion vs domestic use, as it is an offence to knowingly sell red diesel for ineligible use.