Legality and Fuel

It used to be the case that to legally use Straight Vegetable Oil as a vehicle fuel you had to pay duty on every litre that you set aside for road fuel purposes. However, since July 2007 if you are using/producing less than 2500 litres per year of SVO which is not duty paid then you are not required to pay duty on this fuel. This essentially means that for a business with low mileage use or for personal motoring, provided that it is not excessive, then the use of SVO can be duty free. Full details of this threshold limit can be found on this link http://www.hmrc.gov.uk/briefs/excise-duty/brief4307.htm.

It should be noted that the 2500 litres per year is a threshold and not an allowance.  If you exceed this allowance then you are required to pay duty on the full amount that you have used including this first 2500 litres.

If you use/produce SVO in quantities greater than 2500 litres per year then you are still liable to pay duty on every litre that you set aside for road fuel purposes. SVO falls under the same duty frame work as biodiesel, which since 2002 has had a duty rate 20p/l lower than the duty rate on Ultra Low Sulphur Diesel (ULSD) – Notice 179E Biodiesel and Bioblend. The rate on biodiesel and SVO is currently 30.35p/l as the duty rate on ULSD is 50.35p/l.

There was a period in 2005 when there was confusion about whether SVO should attract the same reduced duty rate as biodiesel. However, following a public consultation and a review by the HMRC of the fiscal definition of biodiesel it was concluded that there was no definitive evidence to justify excluding SVO (Summary of responses: Review of the definition of biodiesel). Veg Oil Motoring has been claiming the reduced biodiesel duty rate on SVO, with the written approval of the HMRC, since 2003

The latest update on the taxation is that SVO producers that are registered to pay duty on their fuel can now be awarded Renewable Transport Fuel Obligation Certificates. This new scheme started at the beginning of April 2008 and involved the establishment of the Renewable Fuels Agency, under the Department for Transport. This agency awards certificates based on the renewable fuels that have been declared to the HMRC each quarter. It is believed that the certificates will equate to a return of around 14-15p/l on the duty that has been paid on SVO. Further details of this scheme will come to light once it has been in operation for over a quarter. For more details see www.dft.gov.uk/rfa.