FINANCE BILL 2001
CLAUSE 3: HYDROCARBON OIL (FUEL TESTING PILOT PROJECTS)
SUMMARY
1. This clause provides that the Commissioners may allow reliefs as regards excise duty on fuel used by businesses within approved pilot projects connected with the technological development of more environment-friendly fuels. The provision will take effect from Royal Assent.
DETAILS OF THE CLAUSE
2. Subsection (1) inserts a new section 20AB into the Hydrocarbon Oil Duties Act 1979. Details of the new section are described in paragraphs 6 to 17 below.
3. Subsection (2) makes a consequential amendment to subsection 24(1) of the Hydrocarbon Oil Duties Act 1979.
4. Subsection (3) makes a consequential amendment to subsection 27(1) of the Hydrocarbon Oil Duties Act 1979.
5. Subsection (4) amends subsection 12B(1)(h) of the Finance Act 1994 (excise duty reliefs that may be recovered under section 12A when wrongly given).
DETAILS OF SECTION 20AB
6. Subsection (1) provides that the Commissioners may make regulations allowing reliefs as regards excise duty on fuel. Reliefs as regards excise duty on the fuel may only be allowed where the fuel is used for a fuel-testing project, the project is approved for the purposes of the development of the fuel and the fuel is used within the specified relief period.
7. Subsection (2) defines the term ?experimental fuel? as used in the section.
8. Subsection (3) provides that the Commissioners must, by regulations, specify both the start and end date of the experimental period and the form of relief that is to be taken as regards the excise duty on the fuel.
9. Subsection (4) provides that the form of relief specified in subsection 20AB(3) must be either a repayment or a rebate (or extra rebate)of excise duty.
10. Subsection (5) provides that the relief as regards the excise duty on the fuel shall only be allowed to the extent specified in,or determined in accordance with, regulations made under subsection 20AB(1). This subsection also provides that the relief shall be allowed subject to such conditions as the Commissioners may impose and any directions made in respect of an approved project.
11. Subsection (6) provides for particular conditions that may be imposed by the Commissioners if relief is to be allowed. These conditions include the collection, keeping, compilation or analysis, or the supply to the Commissioners or other persons of data relating to the production, use or performance of an experimental fuel.
12. Subsection (7) provides that the Commissioners can only give directions under subsections (8) and (9) where they have approved a fuel-testing project.
13. Subsection (8) provides that the Commissioners must give directions specifying each experimental fuel for the purposes of whose development the project is approved, the relief period for the fuel and any conditions that apply to the allowance of relief as regards the excise duty on the fuel.
14. Subsection (9) provides that the Commissioners may give a direction that the form of relief takes a different form to that specified under subsection (3) and may also give directions as to administration in connection with allowing reliefs.
15. Subsection (10) provides that the relief period specified in a direction given under subsection (8) cannot exceed the experimental period for the fuel.
16. Subsection (11) defines the terms ?excise duty? and ?fuel-testing project? as used in this section.
17. Subsection (12) specifies that regulations made under this section may make different provision for different cases. This subsection allows the Commissioners to make specific regulations for specific experimental fuels or approved projects.
BACKGROUND
18. In his Pre-Budget Statement the Chancellor announced a major challenge to British Industry to develop proposals for practical alternative fuels. 65 proposals were put forward in response to the ?Green Fuels Challenge? covering a range of potential alternative fuels.
19. As a result, Budget 2001 announced reductions in duty on fuels which offer short- to medium-term environmental benefits specifically biodiesel and gas used as road fuel. Now the Government wants to go further. The introduction of legislation that allows for duty reductions or exemptions for fuels to be used within pilot projects underlines the Government's commitment to the environment. It demonstrates that the Government does not view the reduction in duty for biodiesel as a one-off. It illustrates the Government's desire to stimulate the interest of British industry to develop and produce profitable alternative fuels and technology.
20. Many alternative fuels have not undergone the same scientific evaluation as biodiesel. This measure allows the Government to offer support through the duty system while the feasibility and benefits of these emerging fuels are being assessed. The Chancellor has announced that, subject to further negotiations, pilot projects will be authorised this year for hydrogen, methanol, bioethanol and biogas.
21. This measure compliments the Chancellor's announcement in the Budget that biodiesel is to benefit from a substantial duty reduction. It will allow the assessment of those fuels which are considered to be the most promising environmentally-friendly alternatives. The Government is particularly interested in those fuels which move the UK towards a sustainable hydrogen-based fuel economy.
22. This measure enables the UK to implement the provisions of Article 8(2)(d) of EU Council Directive 92/81, which allows Member States to apply reduced duty rates for fuel used in pilot projects for the technological development of more environmentally-friendly products, particularly those from renewable resources, and provides a degree of clarity on the fundamentals of a pilot project.