FINANCE BILL 2001
CLAUSE 2: HYDROCARBON OIL (REBATE ON UNLEADED PETROL)
SUMMARY
1. This clause removes the separate, effective rate of duty for higher octane unleaded petrol (also known as lead replacement petrol (LRP) or super unleaded petrol). This change took effect from 6 pm on 7 March 2001.
DETAILS OF THE CLAUSE
2. Subsection (1) substitutes a new section 13A for the existing section 13A of the Hydrocarbon Oil Duties Act 1979. The new section provides for a rebate of duty on unleaded petrol, other than ultra-low sulphur petrol, charged with the excise duty on hydrocarbon oil and delivered for home use. This new section does not provide for the rebate of duty previously allowed for higher octane unleaded petrol.
3. Subsection (2)(a) substitutes a new sub-paragraph (ab) for the existing sub-paragraphs (a) and (b) of paragraph 1(1) of Schedule 2A (mixing different kinds of unleaded petrol) to the Act. The new sub-paragraph (ab) makes it a contravention under paragraph 1 if leaded petrol is produced by the addition of lead to unleaded petrol in respect of which a rebate has been allowed under section 13A of that Act.
4. Subsection (2)(b) makes a consequential amendment to paragraph 1(1)(c) of Schedule 2A to the Act.
5. Subsection (3) substitutes a new paragraph 2A for the existing paragraph 2A of Schedule 2A to the Act. The new paragraph 2A provides that it is a contravention under this paragraph if unleaded petrol, that is not ultra-low sulphur petrol, is produced by mixing ultra-low sulphur petrol and unleaded petrol, in respect of which a rebate has been allowed under section 13A of the Act.
6. Subsection (4) substitutes new sub-paragraph (3A) for existing sub-paragraph (3A) of paragraph 8 of Schedule 2A to the Act. The new sub-paragraph provides for the rate at which the duty shall be charged on a mixture that is produced in contravention of paragraph 2A (mixing different kinds of unleaded petrol). That rate is calculated by deducting from the rebate under section 13A of the Act that is in force when the mixture is produced from the rate for light oil (that is not ultra-low sulphur petrol) that is in force at the time the mixture is produced.
7. Subsection (5) provides for the changes to take effect from 6 pm on 7 March 2001.
BACKGROUND
8. This clause effectively abolishes the higher duty rate for higher octane unleaded petrol. The old section 13A of the Hydrocarbon Oil Duties Act 1979 provided for separate rebates of duty on unleaded petrol (other than ultra-low sulphur petrol) and higher octane unleaded petrol, as defined within the Act. The new section 13A only provides for a rebate of duty for unleaded petrol (other than ultra-low sulphur petrol). The effect of this clause is that the duty on unleaded petrol is now dependent only on the sulphur and aromatics content of the fuel. Subsections (2), (3) and (4) of this clause make consequential amendments to Schedule 2A of the Act (mixing different kinds of unleaded petrol), removing references to higher octane unleaded petrol from the Schedule.
9. A recent DETR environmental assessment confirmed that use of higher octane unleaded petrol does not cause significant environmental concerns over and above use of lower octane fuels.
10. The Government recognises that many people driving older cars are unable to afford newer vehicles and become locked into buying LRP and has therefore abolished the separate rate for higher octane fuels. Duty will now be charged on this fuel at the rate appropriate to unleaded petrol or ultra low sulphur petrol dependent upon the sulphur and aromatics content of the fuel. The RON and MON rating which previously defined higher octane fuel is no longer relevant for duty purposes.
11. The Government is encouraging the uptake of cleaner ultra low sulphur fuels by reducing the duty rates. The rate for ultra low sulphur petrol has been cut by 2 pence per litre. This will now also provide an incentive to reduce sulphur levels in higher octane fuels.