Angus Brendan MacNeil – 2015 Parliamentary Question to the HM Treasury

The below Parliamentary question was asked by Angus Brendan MacNeil on 2015-11-04.

To ask Mr Chancellor of the Exchequer, if he will make an assessment of the effect on the viability and competitiveness of UK oil refineries of the imposition of VAT and duty on products shipped by such refineries to another UK customs bonded oil storage location at the point of departure from the refinery.

Damian Hinds

Hydrocarbon oil becomes liable to duty and VAT when it is released for consumption in the UK. This is either: when it is imported; or when it is produced in the UK and delivered for home use from a refinery. Where hydrocarbon oil is imported to an excise warehouse, the duty and VAT is due when the oil is released for home use from the warehouse.

This administratively simple fuel duty system reduces the number of taxpayers and ensures that there is minimal fraud by reducing opportunities for criminals to infiltrate the supply chain. As a result, fuel duty is a large and stable source of revenue for the Exchequer, raising £27.2 billion in financial year 2014/15, with a very low tax gap of less than £100m. Allowing the movement of fuel on which duty and VAT has not yet been paid within the UK would add complexity to the administration of the tax and increase the opportunities for tax evasion. For these reasons the government has no plans to change the fuel duty or VAT point.

One of this government’s key priorities, as we transition to a low carbon economy, is to ensure a secure and resilient oil supply at affordable prices, whilst supporting investment and jobs. Following a review of the refining and import sectors by the previous government in 2014, a package of actions was developed, designed to help improve the operating environment for the refining and import sectors. These actions focus on three areas: a partnership approach with industry; removing market distortions; and tackling regulatory burden.