Fuel Duty

Production of biofuels, fuel substitutes and fuel additives

Biodiesel

Biodiesel is a liquid fuel produced from biomass or waste cooking oil that is suitable for use in diesel engines.

Read a definition of biodiesel on the HM Revenue & Customs (HMRC) website.

Bioethanol

Bioethanol is defined as a liquid fuel consisting of ethanol produced from biomass, and capable of being used for the same purposes as light oil.

Other fuel substitutes

A 'fuel substitute' is any liquid (except water under certain circumstances) that is not hydrocarbon (mineral) oil, biodiesel, bioethanol or bioethanol blend that is used to fuel any engine, motor or other machinery or is added to motor fuel. This means it will be liable for Fuel Duty.

Fuel additives

Any liquid that is added into the fuel supply of vehicles either via the filler cap or other parts of the fuel system is classed as a 'fuel additive'.

Fuel Duty on biofuels and other fuel substitutes

Biofuels and other fuel substitutes are liable for Fuel Duty when they are intended for use as a fuel for any engine, motor or other machinery, or as an additive or extender in fuel, or to be blended with hydrocarbon oil.

They are not liable for duty then they are intended for other specific uses, such as heating fuel.

When biofuels and fuel substitutes are liable for Fuel Duty, the duty is due at the earliest of the following points:

  • when they are sent out from premises registered for production
  • when they are used as a motor fuel
  • when the decision has been made that they are going to be used as a motor fuel (known as being 'set aside' as motor fuel)

Fuel Duty rates for biofuels and other fuel substitutes

The rate of duty on biofuels, fuel substitutes and additives is worked out using the proposed or actual use of the fuel and the type of engine. For example, if a substitute or additive is to be used as a road fuel in a diesel engine, then the rate of duty for diesel for road use will apply.

For more information, see the page in this guide on rates of Fuel Duty.

Before April 2010, biofuels (biodiesel and bioethanol) produced from biomass or waste cooking oil that were intended for use as road fuel received a 20 pence per litre reduction on the Fuel Duty rate.

From 1 April 2010, this reduction was stopped for biodiesel and bioethanol produced from biomass. These are now subject to the same rate of duty as the hydrocarbon road fuel.

However, biodiesel produced from waste (used) cooking oil will continue to have a 20 pence per litre duty differential until 31 March 2012.

Registration as a producer

If you produce more than 2,500 litres of biofuel or other fuel substitutes a year, or you use them as motor fuel and duty has not been paid on them, you will need to contact HMRC to register as a producer. HMRC will make arrangements for you to account for and pay the Fuel Duty due on any products set aside, or delivered for use, as a motor fuel.

You will need to retain records of your overall production, supply and use and you will have other responsibilities.

Find out about registering and accounting for duty on biofuels in Notice 179E on the HMRC website.

Developed with:

HM Revenue & Customs