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As announced in the Budget earlier this year, the duty on all types of fuel will increase from 1 September 2009.

This will have an impact on the pricing of Red Diesel.

The British Marine Federation have put together example of a calculation of duty and VAT under the new arrangements. The proportion split between propulsion and domestic usage will vary.

HMRC have confirmed that VAT is charged at the reduced rate of 5% on fuel for propulsion and domestic use.

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 includes 10.80 ppl duty already paid to fuel supplier):

Propulsion calculation (i.e. 60%)

60 litres @ 70 ppl = £42.00
60 litres @ 45.39 ppl = £27.23 (additional duty)
VAT @ 5% = £3.46

Propulsion total = £72.69

Domestic calculation (i.e. 40%)

40 litres @ 70 ppl = £28
VAT @ 5% = £ 1.40
Domestic total = £29.40

Transaction total = £102.09