Hydrocarbon Oil Duty

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UK filling stations collected more than PS27 billion in fuel duty in 2014-15. Filling station off the A40 roundabout - geograph.org.uk - 1169731.jpg
UK filling stations collected more than £27 billion in fuel duty in 2014–15.

Hydrocarbon Oil Duty (also fuel duty and fuel tax) is a fuel tax levied on some fuels used by most road motor vehicles in the United Kingdom; with exceptions for local bus services, some farm and construction vehicles and aviation, which pay reduced or no fuel duty.

Contents

The government revenue from fuel duty was £27.1 billion for the financial year 2014–2015.[ citation needed ] This is an increase in cash terms in comparison to 2013-2014 but now only represents 1.5% of GDP. This is in contrast to the start of the 2000s when it was 2.3% of GDP. A further £3.9 billion is raised from the VAT on the duty, contributing some 3.5 per cent of total UK tax revenues. [1] The Fuel Price Escalator, which was introduced in 1993 was abandoned after the disruptive fuel tax protests of 2000.

History

The Finance Act 1910 (the so-called People's Budget) introduced a petrol duty in the UK for the first time. From April 1909 the rate was set at 3d (£0.013) per UK gallon, bringing the price of a typical UK gallon to 1s 1½d (equivalent to £8.57in 2023). [2] [3] [4]

It was then abolished by the Finance Act 1919 after several years of steady petrol price rises and replaced by vehicle taxation, and the tax disc based on horsepower, after which the cost of petrol was about 4s[ citation needed ] (equivalent to £11.61in 2023) [2] per UK gallon.

In 1928, following market reductions in the cost of a UK gallon of fuel to about 1s 2½d (equivalent to £4.6in 2023), [2] the Government introduced a tax of 4d (£0.017) per UK gallon [4] bringing the cost of a UK gallon of petrol to 1s 6¾d[ citation needed ] (equivalent to £5.94in 2023). [2]

In the 1993 Budget during the Major ministry, Norman Lamont introduced a 10p rise and also a Fuel Price Escalator whereby the cost of fuel would be increased annually by 3 per cent above inflation in future years; the Petroleum Revenue Tax was reduced in the same budget and later abolished. Kenneth Clarke, the new chancellor, increased the escalator to 5p in November of that year. These increases were introduced at a time of considerable change in government transport policy, and followed major UK road protests, including the M11 link road protest and the protest at Twyford Down. [5] The escalator was increased in 6p per year in 1997 by Gordon Brown, chancellor for the new Blair ministry.

The escalator was effectively cancelled by the Brown ministry follow severe disruption caused by the fuel tax protests in 2000. Since that time more cautious increases have been applied. [4] A planned 3.02p/litre rise which was confirmed by the 2012 United Kingdom budget to come into effect on 1 August 2012 [6] was later deferred until 1 January 2013 at short notice. The last increase in Fuel duty occurred in 2010. A decrease then occurred in 2022.

Rates and receipts

The rates since 23 March 2022 have been as follows:

FuelRateNotes
Petrol, diesel, biodiesel, bioethanol £0.5295 [7] per litre
Natural gas used as road fuel (inc biogas)£0.2257 [7] per kg
Road fuel gas other than natural gas£0.2888 [7] per kg

VAT at the current rate is then added to the total price. [8] The taxation percentage of forecourt prices varies according to the price of oil, rising from 55.9% at 65p per litre untaxed to 61.4% at 50p per litre (2012 figures).

European comparisons

The UK average petrol price as of 11 January 2016 is £1.01 per litre. This is slightly above the European average but is 30p lower than the peak in 2014. With declining oil prices, it has been suggested petrol could fall to 86.9p per litre if oil prices fall to $10 a barrel. Average diesel prices are currently £1.03 per litre. The minimum petrol price available is 99.7p and £1.03 for diesel. The minimum across Europe is 87.9. [9]

Aviation

Avtur receives a full rebate of fuel duty when used as fuel for an aircraft, excluding private aircraft. Avtur for commercial flights within the UK and all private flights is normally liable to VAT. [10] There is no VAT charged on avtur for international flights in accordance with the Convention on International Civil Aviation, [11] although commercial operators do pay Air Passenger Duty.

Avgas, used by some smaller planes, was taxed at half the rate of road petrol for all users until October 2008, when the reduced rate was limited to commercial flying. A minority of light planes use standard road petrol and pay tax at the normal rate. [12]

Buses

The Bus Service Operators Grant provides a fuel duty rebate to local bus service operators (but not for express coach which receives no rebate). As of April 2010 the rebate was £0.43 for diesel, £0.2360 for road fuel gas other than natural gas and 100% for biodiesel and bioethanol. Additional rebates are available for increasing fuel efficiency, low carbon emission vehicles and equipping vehicles with Smartcards and GPS tracking equipment. [13]

In 2001 it was proposed that long-distance scheduled coach services should receive the rebate in return for offering half-price fares to older and disabled passengers. [14]

Construction and farm vehicles

Filling station selling 'red diesel' 2008 Station Road Garage - prices - geograph.org.uk - 847101.jpg
Filling station selling 'red diesel' 2008

Registered construction and farm vehicles 'red diesel' which includes a fuel dye has a significantly reduced tax levy compared to normal road fuel. This can only be used in registered agricultural and construction vehicles including tractors, excavators, cranes and there are heavy fines for misuse. [15]

Trains

The Hydrocarbon Oil Duties Act 1979 as enacted only charges duty on fuel for "road vehicles". [16] Furthermore, the amendment in the Finance Bill 2021 explicitly includes "Any vehicle designed to be operated on a railway" in the list of excepted machines, which are those allowed to use rebated diesel and biodiesel. [17] [18]

To incentivise the use of cleaner fuels in trains, the duty was reduced from 53p to 8p for blends of red diesel and biodiesel used in approved pilot schemes in the Budget 2007. [19] [20] [21]

See also

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References

  1. United Kingdom National Accounts: The Blue Book (Report). Office for National Statistics. 2010.
  2. 1 2 3 4 UK Retail Price Index inflation figures are based on data from Clark, Gregory (2017). "The Annual RPI and Average Earnings for Britain, 1209 to Present (New Series)". MeasuringWorth . Retrieved 7 May 2024.
  3. "Finance (1909-10) Act 1910".
  4. 1 2 3 "Fuel duty". Politics.co.uk.
  5. "Gummer denies the 'great car economy'". The Independent. 20 March 1994.
  6. "Budget 2012: Fuel duty increase gets go-ahead". BBC News. 21 March 2012.
  7. 1 2 3 "Hydrocarbon Oils: Duty Rates" (PDF). HMRC. Archived from the original (PDF) on 23 May 2011.
  8. Leroux, Marcus (24 November 2008). "Fury as fuel duty lifted 2p to offset VAT cut". London: Times Newspapers. Retrieved 3 April 2009.
  9. "Petrol Prices | Find the Cheapest Fuel Near You | PetrolPrices". www.petrolprices.com. 9 October 2018.
  10. "Aviation turbine fuel (Excise Notice 179a)". GOV.UK. 7 February 2024. Retrieved 20 June 2024.
  11. "UK taxpayers 'subsidise' airlines by 300 each every year". Friends of the Earth. 13 March 2006. Archived from the original on 9 July 2011.
  12. "Fuel used in private pleasure craft and for private pleasure-flying". HM Revenue and Customs. Position up to 31 October 2008: Two main fuels are used in aviation: Aviation turbine fuel (Avtur) which is used in commercial jet and turbo-prop aircraft and aviation gasoline (avgas) which is used mainly in small piston-engined aircraft. Helicopters use both avtur and avgas. Some micro-light aircraft can fly on unleaded petrol. Until 31 October 2008 all avtur, which is an unmarked type of kerosene, was fully rebated to a nil rate of duty. All avgas was subject to a reduced duty rate which was set at half of the leaded petrol rate whether it was used for commercial or private pleasure use.taxed. Changes introduced on 1 November 2008 The expiry of the derogation gave rise to the requirement to charge the full rate of duty on fuel used for private pleasure-flying and led to changes in the treatment of both avtur and avgas. Unleaded petrol used in private pleasure-flying is not affected as it was already subject to duty at the full rate as used in road vehicles.
  13. "Bus Service Operators Grant (BSOG) rates in England" (PDF). Department for Transport. Archived from the original (PDF) on 22 November 2010.
  14. "II. Trends in the bus industry". Hansard. Archived from the original on 30 September 2007.
  15. "Thousands using illegal car fuel". BBC News. 3 November 2007.
  16. "Hydrocarbon Oil Duties Act 1979 (Original as enacted)". legislation.gov.uk. Retrieved 19 June 2024.
  17. "Hydrocarbon Oil Duties Act 1979 Schedule 1A". legislation.gov.uk. 22 February 2024. Retrieved 19 June 2024.
  18. "Reform of red diesel and other rebated fuels entitlement". GOV.UK. Retrieved 19 June 2024.
  19. "Train Operators Welcome Chancellor's Cut In Biofuel Duty". Association of Train Operating Companies. 6 December 2006. Archived from the original on 4 June 2008.
  20. "Pre-Budget Report - Hansard - UK Parliament". hansard.parliament.uk. 6 December 2006. Column 311. Retrieved 19 June 2024. I can also announce that, to incentivise the use of cleaner fuels in trains in the same way as we do for cars, the tax rate for piloting rebated fuels mixed with biofuels will be reduced from 53p to 8p.
  21. "Budget 2007 Building Britain's long-term future" (PDF). 21 March 2007. p. 221. ISBN   978 0 10 294455 6. As announced in the 2006 Pre-Budget Report, with effect from 1 March 2007, red diesel and biodiesel blends may be used in approved pilot schemes at the red diesel rate (7.69ppl).