The Chancellor has announced that privately owned boats and yachts will have to use white diesel instead of the cheaper red diesel in their tanks to curb pollution
The rule change will force canal boat, yacht and motorboat owners to use white diesel, which attracts the standard rate of fuel duty tax and VAT at 20%, rather than red diesel, with VAT at the reduced 5% rate, unless they are permanently moored.
The Chancellor, Rishi Sunak, said: ‘Sectors using this red diesel scheme are some of the biggest contributors to our air quality problem – emitting nearly 10% of the harmful gasses polluting the air of our cities every year.
‘This is a tax relief on nearly 14m tonnes of carbon dioxide every year. This is the same as the entire population of Manchester and London taking a return flight to New York.
‘It has been a £2.4bn tax break for pollution that has hindered cleaner alternatives. I will abolish the tax relief for most sectors. This change will not take effect for two years.’
The objective of this measure is to ensure that private pleasure craft continue to pay the same duty rate they currently pay on the fuel they use for propulsion, while achieving consistency with a 2018 judgment by the Court of Justice of the European Union (CJEU) (case C-503/17) and meeting the UK international obligations.
The court ruled that it is contrary to the Fuel Marker Directive for the UK to allow marked diesel to propel private pleasure craft, even though the user of the fuel pays their supplier the duty differential between the rates for red diesel and unmarked (white) diesel on the amount used to propel their craft.
Users of diesel propelled craft, particularly private pleasure craft, and those involved in the supply of fuel to UK craft (operators of ports, marinas and inland waterway refuelling stations) will be affected.
In the UK, there are two forms of diesel, unmarked (white) diesel primarily for use by vehicles on public roads which attracts the full fuel duty rate of 57.95 pence per litre, and marked (red) diesel which is sold at a reduced duty rate of 11.14p per litre. Red diesel is marked with a dye (red in the UK) and is used for agricultural vehicles, commercial craft and trains.
The change will require secondary legislation.
