Filling up with diesel

From January 4th 2011, HMRC raised the rate of VAT to 20%. Despite this increase HMRC have confirmed that the VAT rate for the sale of marine fuels will remain at 5% for both domestic use and propulsion.

Red Diesel Fuel Duty
(with acknowledgements to the British Marine Federation for the information in this article)

As was indicated in the March 2010 budget, fuel duty rates for diesel have increased from the 1st January 2011. The full duty rate for diesel has risen by 0.76 (58.95p per litre) pence while the reduced rate has also risen by 0.15 (11.33 pence per litre). An illustrative calculation is shown below:

This example assumes a 60% (propulsion) and 40% (domestic) split for a purchase of 100 litres of red diesel (the price of diesel is assumed to be 70 pence per litre (ppl)) which already includes 11.33 ppl duty paid to the fuel supplier:

Propulsion calculation on 60 litres (60% of the total)

60 litres @ 70 ppl = £42.00 (price includes lower duty rate)
60 litres @ 47.62 ppl = £28.57 additional duty (= higher duty rate minus lower duty rate already paid to fuel supplier)
VAT @ 5% = £3.53
Propulsion Total = £74.10

Domestic calculation on 40 litres (40% of the total)

40 litres @ 70 ppl = £28.00 (price includes lower duty rate)
VAT @ 5% = £1.40
Domestic Total = £29.40

Transaction Total = £103.50

N.B. The DirectGov website currently shows incorrect information for the red diesel duty rate. HMRC have confirmed that 11.33 pence per litre is the new level for gas-oil at the lower rate.

Full details on the Red Diesel Derogation can be found on the BMF website.