Biofuels: Frequently asked questions

What is biodiesel?

Section 2AA of The Hydrocarbon Oil Duties Act 1979 (HODA) describes biodiesel as a diesel quality liquid fuel that is produced from biomass or waste cooking oil, and has an ester content which is not less than 96.5 per cent by weight and a sulphur content not exceeding 0.005 per cent.

Can I make biodiesel and what is the Excise Duty on this?

You must notify HM Revenue & Customs (HMRC) of your intention to produce biodiesel. For details, contact the Excise and Customs Helpline on Tel 0845 010 9000 (+44 2920 501 261 outside UK).

It is the responsibility of producers to show HMRC that their product meets all aspects of the legal definition and sufficient tests must be carried out to prove that the specification is met. If a product does not meet all aspects of the definition it is a fuel substitute and will attract a higher rate of duty.

Biodiesel that can be shown to meet the full definition will attract a duty rate of 20 pence per litre lower than the sulphur-free diesel rate.

What is the duty rate on cooking oil?

Cooking oil (whether used or unused) which has not been specifically produced or processed as a road fuel, will normally be classed as a fuel substitute. The duty rate will be the same as the sulphur-free diesel rate.

The important question is whether the finished fuel meets the legal definition. If a vegetable oil used as road fuel meets the fiscal definition HMRC will be happy to accept that it is entitled to the duty rate for biodiesel.

How do I notify HMRC that I am using cooking oil in my vehicle?

If you use cooking oil, and/or produce biodiesel or any other fuel substitute for use in your vehicle you must contact HMRC in order to ‘Make Entry’. This is to record details of where the fuel is made (or used) and to register your activity with HMRC. You will receive information on how to record your fuel use and pay the Excise Duty due.

It is worth noting however that ‘Making Entry’ of your premises does not authorise you to produce a particular type of fuel or give approval to your method of production.

What happens when I ‘Make Entry’?

When you contact the Excise and Customs Helpline they will send you an Excise Entry Form EX 103 (sole trader or partnership) or EX103A (incorporated company) and a copy of Notice 179E Biofuels and other fuel substitutes if you do not already have one. You should complete the Excise Entry form and return it to:

HM Revenue & Customs
Mineral Oil Reliefs Centre
Dobson House
Regent Centre
Newcastle upon Tyne
NE3 3PF

Can I use vegetable oil in my car if I mix it with normal diesel?

You can use vegetable oil in your car and mix it with diesel (vegetable oil is generally used as a substitute for diesel) but you will have to make arrangements to pay the Excise Duty to HMRC. See question ‘How do I notify Revenue & Customs that I am using cooking oil in my vehicle?‘.

Important Note: It is illegal to run your car on any fuel substitute without having first paid the duty.

What if I use biofuel to generate electricity?

There is a relief in place to cover biofuel (including biodiesel) used to generate electricity – Part 7 of the Biofuels and Other Fuel Substitutes (Payment of Excise etc) Regulations 2004 is the relevant legislation. This relief applies to all biofuels and fuel substitutes; it is not restricted solely to those that meet the biodiesel/bioethanol specification.

Details can be found in Notice 179E Biofuels and other fuel substitutes.

How do I claim the relief?

If you are already approved for deferment, then you should set-off the relief against your normal Excise Duty liability in section 2.b. of form HO10.

If you are not approved for deferment then you should set-off the relief against your normal Excise Duty liability on form HO930.

In any other case, you will need to make a claim, in writing, to the following address:

HM Revenue & Customs
Mineral Oil Reliefs Centre
Dobson House
Regent Centre
Newcastle upon Tyne
NE3 3PF

HMRC may ask for evidence to substantiate any claim. These may be in the form of purchase orders, delivery notes and sales invoices, to show that the biofuel in question has been used as fuel to generate electricity. The claimant may also need to provide evidence that the biofuels were duty-paid and are not the subject of any other application or claim for repayment, remission or drawback.

How do I pay biofuels duty?

If you are not approved for deferment after you have made entry you will be sent Form HO930 each month. This form must be completed by:

• filling in the appropriate line on the return, which is left blank for this purpose
• the figure 589 for biodiesel, or 595 for bioethanol after the figure 33 in the second column headed ‘Tax Type’

For other fuel substitutes you should fill in the appropriate line according to the engine type that your product will be used in.

The return form should also state:

• ‘Biodiesel’ or ‘Bioethanol’ in the third column, show the total volume, in litres, set aside or delivered as road fuel in that accounting period in column 4
• calculate the amount of duty due by multiplying the volume by the rate of Excise Duty in force during the accounting period

The return form should then be sent together with payment for the duty due to:

Tax Accounting Centre
Two Broadway
Five Ways
Birmingham
B15 1BG

Your accounting period will be the calendar month, and payment must be made (and the return furnished) by the 15 of the following month. NIL returns are also required.

If you are approved for deferment you will complete form HO10.

How do I pay Excise Duty on bioblend and bioethanol blend?

If you blend biodiesel or bioethanol with duty suspended oil to produce bioblend or bioethanol blend, this can only be done in an excise warehouse. Duty payment may be deferred provided the products are placed in the same excise warehouse as the oils they are being blended with.

You will need to obtain a Duty Deferment Account in order to do this. See Notice 179E Biofuels and other fuel substitutes for more information.

The Excise Duty due on these blends must be pro-rated between the two grades on the HO10 and be shown against the appropriate tax types. For example, in the case of bioblend, duty must be accounted for duty under tax type 589 for the biodiesel portion and 545 for the ULSD portion.

If any other type of heavy oil is used to make bioblend, that portion of the blend must be shown under the appropriate tax type.

You must be able to support the apportionment from your own production and blending records. The proportions are to be shown in the records to ‘the nearest 0.001 per cent’.

What is biomass?

‘Biomass’ is described in the law (HODA) as meaning the biodegradable fraction of products, wastes and residues from agriculture, forestry and related activities as well as the biodegradable fractions of industrial and municipal waste. This does not include mineral oils.

Any organic matter that is available on a renewable or recurring basis qualifies as biomass. For example:

• dedicated energy crops and trees
• agricultural food and feed crop residues
• waste vegetable and animal substances
• wood, wood wastes and residues
• aquatic plants
• grasses
• residues
• fibres
• animal wastes
• municipal wastes and other materials

What about biodiesel used in place of rebated fuels?

Biodiesel used for off-road purposes is entitled to a repayment of some of the duty paid. However, you will have to use duty-paid biodiesel. The rate of the repayment is available via the HMRC website or the Excise and Customs Helpline.

You will need to show us that the biodiesel was fully duty paid and that it had not been used as a road fuel.

If you make a claim it must be for:

• at least two months but not exceed three years
• £50.00 or more

Additionally, claims must be made within three months of the end of the period to which they relate.

For further information on how to make a claim you should contact our Excise and Customs Helpline on Tel 0845 010 9000. You should send your claim along with supporting evidence to:

HM Revenue & Customs
Mineral Oil Reliefs Centre
Dobson House
Regent Centre
Newcastle
NE3 3PF

This scheme does not apply to users of bioblend, bioethanol or bioethanol blend. Please note: The scheme only applies when 100 per cent biodiesel is used – it does not apply to mixing biodiesel with other fuels.