Finance Bill 2002: EXPLANATORY NOTE
CLAUSE 7: FUEL SUBSTITUTES
SUMMARY
1. Clause 7 amends the Hydrocarbon Oil Duties Act 1979 (HODA 1979) and the Finance Act 1993 to enable fuel substitutes to be charged to duty at the rate applicable to the hydrocarbon oils for which they substitute. The changes take effect on Royal Assent.
DETAILS OF THE CLAUSE
2. Subsection (1)(a) amends section 6A(5) of HODA 1979. It inserts the expression 'such description of hydrocarbon oil as may be so specified? in place of a list of specific oils. This enables the Treasury to make an order providing for any fuel substitute to be treated for the purposes of HODA 1979 as if it were any hydrocarbon oil.
3. Subsection (1)(b) amends section 6A(6) of HODA 1979. It inserts the expression ?hydrocarbon oil of the description? into the section in place of ?the substance falling within the descriptions specified in subsection (5) above? and is a consequence of the amendment made by subsection (1)(a). This amendment has the effect that a Treasury Order shall, so far as practicable, ensure that a fuel substitute is charged with duty at the same rate, and treated, as whatever description of hydrocarbon oil to which it is most closely equivalent.
4. Subsection (2)(a) amends section 10(2) of the Finance Act 1993. It inserts the expression 'such description of hydrocarbon oil as may be so specified? in place of a list of specific oils. This enables the Treasury to make an order providing for any mineral oil to be treated for the purposes of HODA 1979, as if they were any hydrocarbon oil.
5. Subsection (2)(b) amends section 10(3) of the Finance Act 1993. It inserts the expression ?hydrocarbon oil of the description? into the section in place of ?the substance falling within the descriptions specified in subsection (2) above? and is a consequence of the amendment made by subsection (2)(a).
BACKGROUND
6. Fuel substitutes or mineral oils which substitute for hydrocarbon oils are subject to duty at a rate set by Treasury Order. At present, this rate must be that applicable to the nearest equivalent specified in section 6A(5) of HODA 1979: heavy oil or light oil; aviation gasoline; fuel oil or gas oil; and unleaded petrol. This means that the minimum duty rate for fuels that substitute for ultra-low sulphur petrol (ULSP) and ultra-low sulphur diesel (ULSD) - the main forms of petrol and diesel sold in the UK - is equivalent to the unleaded petrol rate or the heavy oil rate, rather than the lower rates for ULSP or ULSD.
7. The changes implemented in this clause enable fuels that substitute for hydrocarbon oils to be charged at the rate for the actual fuel for which they are a substitute. Fuels substituting for ULSP or ULSD would then be charged to duty at the rates applicable to these fuels, rather than at the higher rates chargeable on unleaded petrol or heavy oil.