Expiry of the derogation for private pleasure boats

Readers will be aware that RBOA has taken a lead role in discussing this with HM Revenue and Customs and had the opportunity to explain our views at a meeting between the RBOA Vice Chairman and Secretary and HMRC.  The formal consultation document has now been issued and we are pleased that much of our input has been included.  Indeed we are the only user organisation to be specifically referred to.  We have submitted our detailed response, shown below, and will print it in the next issue of Soundings.

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Residential Boat Owners’ Association
PO Box 518, Rickmansworth, WD3 1WJ

Please reply by e mail to Chairman (at) rboa.org.uk

Email: envirotax.bst (at) hmrc.gsi.gov.uk

Transport Taxes Team
HM Revenue & Customs
3E/01, 100 Parliament Square
LONDON  SW1A 2BQ

Dear Sir/Madam,

Energy Products Directive - Expiry of the derogation for private pleasure boats

Consultation on the Options for Change 1 August 2007

This response is made on behalf of the Committee of the Residential Boat Owners’ Association (RBOA), the only organisation specifically representing the interests of those who live on boats on the canals, rivers, Broads and coastal estuaries of this Country. The RBOA is pleased to have been closely involved with this consultation from an early stage. We note that much of the information supplied by the RBOA has been used in this document and that many of our previous comments have been considered.

The following summarises the view of the RBOA, followed by a response to your questionnaire (annex A) where it is relevant to our members.

Those who choose to live afloat (Residential Boat Owners) are at the greatest financial risk from the expiry of derogation for private pleasure boats

We would like to clarify the use of the term ‘houseboat’ in your document. This is generally defined as a live-aboard craft which lacks propulsion and is therefore on a permanent and fully serviced mooring. Its fuel will, therefore, be for totally domestic purposes. Houseboats can often utilise zero-rated heating oil delivered directly to large onboard or adjacent tanks. The majority of boat owners represented by RBOA live on craft which are mobile, some travelling continuously, others occasionally, and rely on obtaining their diesel fuel from boatyards.

In our previous submission the RBOA emphasised the extent of diesel fuel used for domestic purposes - heating, cooking and electricity generation - as opposed to boat propulsion. We are pleased to note that you have included the results of our survey indicating that, on average, 60% of diesel is used for these domestic purposes. Our main concern on behalf of RBOA members is the lack of equality with our neighbours on land which would result from the need to use fully duty-paid fuel for domestic purposes.

We are equally concerned with regard to the reduction in the number of outlets providing fuel that is likely to result from any additional burden on suppliers. Many boatyards are run as small family businesses with low profit margins. The pressure on waterside land for housing development has already seen a considerable decline in boatyards and we believe that any additional cost or administration in the retailing of fuel could be the final straw for many more. This would leave many residential boaters a considerable distance from a fuel supplier, potentially resulting in the need to transport fuel in containers. As well as being a major inconvenience, this could have serious safety and environmental pollution implications.

We are strongly opposed to any change to using unmarked, totally duty-paid ULSD diesel for the reasons that you give in the paper (Option C). There would be a potential cost in modifications required to boats, as purging tanks of the red diesel marker is not practical and may require the replacement of tanks – a very difficult task in the majority of already-built boats, and impossible in some. If boaters had to purchase ‘domestic’ fuel, from the same suppliers that supply domestic properties, whilst legally allowed to, it would be difficult to source because very few boats are able to accept the quantity of fuel required for a minimum delivery.

Option A - Supplier collects duty.

This option would require that consideration be given to the fuel used for domestic purposes and that a simple administration system can be developed in order to minimise the burden on Registered Dealers in Controlled Oils (RDCOs). We suggest that these criteria can be achieved by adopting an agreed discount on the full duty to allow for the fuel used for domestic purposes, as a percentage of the total. The RBOA has submitted the results of a members’ survey indicating that 60% of fuel used is for allowable purposes, as noted in your document. Anything less than 60%would not allow residential boaters to exercise their legal right to purchase fuel at the appropriate rate. We understand the IWA have suggested a discount rate of 25% for leisure boaters.

Because of the likely problems for RDCOs in administering a two tier discounted scheme, we would recommend that there is a single rate for fuel at the pump, and that eligible i.e. Residential Boaters should claim back the 35% balance from HMRC on a six monthly or annual basis.

Option B - Self regulated scheme.

The onus to declare and pay duty on the fuel used for propulsion purposes would be entirely with the boater. Our concern is that we see no obvious way of ensuring compliance, other than by reversing the procedure as described so that the eligible boater pays the base rate discounted duty and reclaims the ”residential “ balance of the discount on duty from HMRC on a six monthly or an annual basis.

Option C – Switch to using unmarked ULSD

This option is not viable for many boaters whose craft are fitted with, for example, vintage engines for which ULSD is not a suitable fuel. We are of the opinion that your comment at 2.37 that boaters are using ULSD unknowingly in the Channel Islands is irrelevant, since there are unlikely to be vintage engines in sea-going vessels.

Accreditation & Implementation

We recognise that for options A or B to work there would need to be some form of “accreditation” for residential boats. The RBOA would welcome an early meeting with HMRC to discuss how this might be achieved with the minimum administrative burden for HMRC but sufficiently robust to avoid wide scale fraud.

The RBOA Officers are very concerned to ensure the regime adopted does not require residential boaters to have to publicly declare their status as “residential boaters” as this could lead to the unintended consequence of some losing their existing moorings. Inappropriate action could result, in many instances, in moorers becoming effectively homeless, which is why the moorers, are, in the main, very discreet - hence our concern and request for an early meeting.

Yours faithfully

Beryl McDowall

Chair

For and on behalf of the Residential Boat Owner’s Association.

Annex A – Questionnaire

About you

Are you a private pleasure or commercial boat owner?

Although our individual members are boat owners, we represent the interest of our members - Residential Boat Owners.

For private and pleasure users please provide information on your boating habits.

Please refer to our survey, copies of which you hold and have quoted.

Are you a fuel supplier who makes sales to boats?

No

Options for change

Please provide any comments you may have on the options set out in the

Consultation document.

Option A – Supplier collects duty

A1. How would this option suit your particular circumstances?

We are concerned that as proposed there might be a loss of retailers and further closures of boatyards.

A2. What impact would this have on you?

This would depend on the % of our members’ overall fuel requirements that will be subject to duty, plus the possible reduction in supply outlets.

A3. If you are a supplier of fuel would this option affect your decision to supply

fuel to private and pleasure boat owners?

Not a supplier but our understanding from discussion with suppliers is that it might affect their decision to supply to private and pleasure boat owners.

A4. What costs would you incur under this option? (Please be as specific as you

are able to be and if possible quantify the costs.)

Additional cost incurred by residential boaters will depend on the % of their overall fuel requirements that will be subject to duty.

A5. This option suggests that it may be possible to introduce a certification

scheme for houseboats that would enable owners to purchase fuel at the

reduced rate. Do you have any views on how this should operate? Do you have

alternative suggestions?

N.B.. We would point out that the term “houseboats” strictly refers to static, non-mobilcraft, with no means of propulsion and not designed to have such fitted. Our response refers to all residential boaters, whether on mobile or static craft. We support this option and the RBOA has presented proposals for a way in which this could operate. This is based on an agreed reduced rate of duty, which takes into account an average split between fuel used for propulsion and for domestic purpose. We suggest that this would result in the minimum compliance and admin. costs for both HMRC and the suppliers.

Option B – Self regulated scheme

B1. How would this option suit your particular circumstances?

The RBOA recognises this is the only equitable way of levying the duty and with a minimum burden on suppliers. We do, however, agree that there is a compliance risk as there is no universal registration of boat ownership but as stated elsewhere in this document are very happy to discuss how this could be addressed.

B2. What impact would this have on you?

This would be generally favoured by RBOA members as best meeting their individual circumstances

B3. What costs would you incur under this option? (Please be as specific as you

are able to, and if possible quantify the costs.)

Additional cost of the full duty on the actual fuel used for propulsion purposes only.

B4. This option suggests that the boat owner account for the duty due. However

there are compliance risks to this. Do you have views on how this risk could be

addressed?

Reverse the obligation ie accredited boater reclaims duty paid for allowable purpose.

B5. We welcome your feedback on the compliance costs and admin burden

estimates (contained in the impact assessment accompanying this document) for

this option.

We agree that to operate this could be resource intensive for HMRC: a reclaim regime would reduce the volume.

Option C – Switch to using unmarked ULSD

C1. How would this option suit your particular circumstances?

We do not favour this option as it would unfairly penalise residential boaters. We confirm the problem that you have identified of purging tanks that have contained red diesel and of the technical uncertainties in the use of ULSD.

C2. What impact would this have on you.

Major cost implication to residential boaters, particularly those with a high fuel requirement for domestic purposes.

C3. If you are a fuel supplier, would this option affect your decision to supply fuel

to private pleasure boats?

Although not a fuel supplier, we note that this could necessitate an additional fuel tank and pump which would be a considerable disincentive to supplying pleasure craft.

C4. What costs would you incur under this option? (Please be as specific as you

are able to and if possible quantify the costs.)

We agree with your figures, which give an indicative extra cost incurred of £564 per annum.