Red Diesel

IWA continues to be concerned at the implications for boat owners and boatyard operators following the decision in July 2014 of the European Commission to take the UK Government to court over current UK laws which allow leisure boaters to purchase red diesel.  

This is despite the agreement made with Her Majesty's Revenue and Customs (HMRC) in 2008 whereby boaters can purchase red diesel for propulsion whilst paying the required standard rate of tax, with a form of self-declaration allowing a proportion of the diesel used for heating and lighting to be purchased at a lower rate of tax. 

The Current Threat

The European Commission has referred the matter to the European Court of Justice, stating that the UK is "not properly applying" European excise rules.

The outcome may mean the end of the use of red diesel for any leisure boating, with boatyards and fuel suppliers having to supply unmarked (white) diesel.  Whilst red diesel could continue to be used for heating, it would have to be in a separate tank, and there would be no dispensation for any proportion of fuel used by the engine for generating heat and light.  Commercially operated boats would still be able to purchase and use red diesel, but this would require fuel suppliers and boatyards to have two separate tanks (and pumps) for the different fuels.

IWA is concerned at the increased costs that will be faced by both boat owners and boatyard operators if this change is implemented.  Whilst accepting that any fuel used solely for propulsion should be subject to the higher rate of tax, IWA considers that it is unfair for boat owners to have to purchase fully taxed white diesel for heating and cooking.  

IWA is also concerned at the costs to boatyards and other fuel suppliers in having to install a new or second tank and pump in order to be able to supply white diesel.
IWA considers that it is not practical for most boats that use the inland waterways to have two tanks – one for red diesel and one for white; that inappropriate modifications would raise safety concerns; and that many diesel suppliers would simply not supply both red and white diesel.


Under current EU rules on fiscal marking for fuels, fuel that can benefit from a reduced tax rate has to be marked by coloured dye. Commercial craft are allowed to benefit from fuel subject to a lower tax rate but private boats must use fuel subject to a standard rate.  

Historically, boat owners were able to purchase and use lower-taxed diesel marked with a red dye, otherwise used by the agricultural and construction industries, for pleasure boating. This changed in 2008 when a UK derogation from the Energy Products Directive (which permitted the UK to continue to levy a reduced rate of duty on motor fuel to be used for propulsion in private pleasure craft) ended.

At that time, IWA, RYA and BMF worked closely with HMRC to achieve a sensible arrangement of self declaration, whereby boaters are able to decide at the point of purchase what proportion of their diesel consumption is used solely for propulsion, and what proportion is used for heating and lighting.  

IWA has been aware of this latest threat since 2011 when the European Commission first threatened to open infringement proceedings against the UK Government claiming the UK was not adhering to EU directives on fiscal marketing, designed to prevent the improper use of certain petroleum products.  At that time Justine Greening, the Economic Secretary to the Treasury replied to IWA that the UK Government continues to share IWA's view that the procedures operated in the UK comply with Directives and responded to the Commission accordingly.

Advice was issued by HMRC in April 2012 concerning the use of red diesel on the continent and possible action by other countries against any visiting vessels found with marked red diesel in their fuel tanks.  At that time HMRC stated that there would be no change to the arrangements for the use of red diesel on inland waters in the UK provided the correct amount of duty has been paid.

Red diesel is often preferred by recreational boaters because many believe it to be free of the biofuels (fatty acid methyl esters - FAME) included in road diesel.  FAME may cause damage to seals and other components in older diesel engines but, in reality, there is no guarantee that red-marked fuel will not contain FAME.  

Fundamentally, IWA believes that the agreement reached in 2008 remains entirely consistent with the spirit of EU law and that the UK’s implementation in this manner therefore should not be regarded as an infringement.

In May 2013 the United Kingdom was formally requested to amend its legislation to ensure that private pleasure boats can no longer buy lower taxed fuel intended for commercial boats. On 24 July 2013, HMRC indicated that the UK Government intended to challenge this, a decision welcomed by IWA.  

IWA will monitor the situation now that the formal process of the UK leaving the EU has commenced, and at the appropriate time will make representations to the UK Government to ask for any new legislation to take into account the issues raised above, in order to avoid additional cost and inconvenience to UK boat owners and marine diesel suppliers.

Download the PDF

IWA Briefing Note - Red Diesel
(103 KB, A4, 3 pages)

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