The UK boating market is undergoing a significant shift as regulations around the use of red diesel, a lower-taxed fuel traditionally used by marine vessels, are changing. This article delves into the history of diesel fuel taxation, the specifics of red diesel, and the implications of regulatory changes for leisure boaters in the UK.
In 1900, Dr. Rudolph Diesel introduced the world's first compression-ignition engine at the Paris World's Fair, capable of running on various fuels, including vegetable oil. By 1928, the UK government, under Chancellor Winston Churchill, imposed a hydrocarbon oil duty, taxing light oils like petrol more heavily than heavy oils such as diesel. However, the rise of diesel engines in cars led to a decline in petrol sales, prompting the government to apply the full rate of duty to diesel in 1935. Despite this, diesel for agricultural vehicles and boats continued to enjoy a lower tax rate, a policy whose origins remain somewhat unclear.
Red diesel, dyed red since 1961 to prevent misuse, is a grade of gas oil that benefits from a lower fuel duty. It is similar to standard 'white diesel' but contains a higher sulfur content, making it less environmentally friendly. Red diesel's cetane rating, a measure of combustion quality, is around 45, compared to white diesel's minimum of 51. The higher the cetane rating, the smoother the engine performance.
As of now, marine red diesel for waterside users is taxed at approximately 7.69 pence per litre (ppl) with a VAT rate of 5%. In contrast, road users pay a fuel duty of 48.35 ppl for Ultra Low Sulphur Diesel (ULSD) at roadside filling stations, along with a higher VAT rate of 17.5%.
The European Directive 2003/96/EC, which aligns taxation across EU member states, will affect the UK's red diesel derogation for private recreational craft starting from November 1, 2008. This means leisure boat owners will no longer benefit from the lower tax rate for red diesel used to propel their vessels. Instead, they will be charged the same rate as heavy oil that is not ULSD or Sulphur Free Diesel (SFD), which is 56.94 ppl.
Despite these changes, red diesel will remain available at marinas and waterside pumps, with two different pricing structures. Commercial craft will continue to purchase at the low-duty rate, while leisure boaters will pay the higher duty rate. This dual pricing system is expected to cause less disruption to existing infrastructure compared to a switch to white diesel.
Leisure boat owners will be responsible for self-declaring the duty difference at a later date. However, red diesel used for domestic purposes onboard, such as heating, will still be charged at the lower duty rate, with a slight increase expected from November 1, 2008.
For more detailed information on the history of diesel fuel and its uses, readers can explore resources provided by the Energy Institute and the Royal Yachting Association. These organizations offer insights into the evolution of fuel technology and the implications for marine and environmental policy.
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