HMRC announces preferential split in propulsion and 'domestic use' diesel

If MBM’s last entry was a bit gloomy, this one is positively upbeat. After some sterling work from the British Marine Federation, Royal Yachting Association and Inland Waterways Association, HM Revenue & Customs has announced that from 1 November, it will allow a 60/40 split in propulsion and ‘domestic use’ diesel.

So what does that mean?

From 1 November, only 60% of your fuel bill will be subject to the top rate of duty – 50.35 pence per litre at 17.5% VAT. (The duty figures have been revised by HMRC since the blog was posted below).

40% of your fuel bill, meanwhile, will only be hit with a duty rate of 9.69ppl and 5% VAT, which is what you’re paying right now.

This has all come about because the EU’s Energy Products Directive allows diesel to be charged at a lower rate for ‘domestic use’. On discovering this, the various boating bodies lobbied HMRC for a preferential split – and they got it.

60/40 does not represent every boater’s use of diesel, but HMRC acknowledged that it represented most people’s use.

The use of the word ‘most’ is crucial here. Since it is illegal under EU law for HMRC to institute a flat 60/40 split, what they can do is suggest that this is what fuel vendors accept at the pump.

The industry’s higher ups at the Southampton Boat Show told MBM that they hoped this split would become so ingrained that it wouldn’t be questioned by boater, vendor or taxman.

While no one is going to pretend that rising diesel prices is a good thing, this result is the best of a bad bunch for Britain’s boaters. Based on a current price of 80ppl, diesel from 1 November will shoot up to only around £1.15 per litre instead of the worst case £1.37.

In November’s MBM, we’ll be explaining this more fully, so don’t miss it.