To ask the Chancellor of the Exchequer, if he will grant waivers to dye (mark) rebated fuels such as Hydrotreated Vegetable Oil to support (a) a transition to duty harmonisation on 1 April 2022 and (b) the use of low carbon fuels on major projects including (i) HS2 and (ii) the Thames Tideway Tunnel.
11 January 2022
At Budget 2020, the Chancellor announced that he will remove the entitlement to use rebated fuel from most sectors from April 2022. This will more fairly reflect the negative environmental impact of the emissions they produce and help to ensure that the tax system incentivises the development and adoption of greener alternative technologies.
During the consultation period, the Government engaged directly with a wide variety of organisations, including affected sectors and fuel suppliers, to discuss these tax changes. HMRC have published interim guidance on the implementation of the changes to the tax treatment of rebated fuel, which is available at:
The Government has not announced any changes to the treatment of hydrotreated vegetable oil (HVO) and so it will continue to be taxed at the same rate as diesel and required to be marked if supplied for rebated use. The rebated rate applies to qualifying uses, not to specific fuels, so sectors losing their entitlement will no longer benefit from the rebate regardless of what fuel they use.
As with all taxes, the Government will keep the tax treatment of HVO under review. However, there are no plans at present to change treatment as the Government uses the Renewable Transport Fuel Obligation (RTFO) to incentivise the use of low carbon fuels and reduce emissions from fuel supplied for use in transport and non-road mobile machinery. HVO is eligible for Renewable Transport Fuel Certificates under the RTFO, and is eligible to receive twice the reward in certificates under this scheme where it is produced from waste.