1. Overview

1.1 Information in this notice

This notice explains how you can get relief from excise duty on oil put to certain uses. This is known in the trade as the Industrial Relief Scheme or the Tied Oils Scheme. Tied Oils Scheme is used where appropriate in this notice. This notice has been updated as a result of the UK leaving the European Union.

1.2 Who this notice is for

This notice is for traders who either supply or use oils for an industrial purpose.

1.3 Law that covers these reliefs

The primary law is Section 9 of the Hydrocarbon Oil Duties Act 1979 (as amended), to support the relief the Commissioners of HMRC made regulations — The Hydrocarbon Oil (Industrial Relief) Regulations 2002 — which came into force in July and September 2002.

This notice explains how HMRC interprets the law. It is not a substitute for the law.

1.4 Other relevant laws

Read Motor and heating fuels general information and accounting for excise duty and VAT (Excise Notice 179) for a more complete list of the statutory provisions relating to mineral oils.

2. The Tied Oils Scheme

2.1 What tied oils are

Tied oils are:

• any light oils
• heavy oils that fall into the excise definition of gas oil, fuel oil or kerosene

They must also be:

• delivered and meet the conditions to get relief from excise duty
• put to a use that is eligible for relief from excise duty

Hydrocarbon Oil Regulations 1973, Section 2 has the full definitions.

2.2 Uses of oil that are eligible for relief from excise duty

All uses are eligible for relief unless the oil is used for:

• fuel for any engine, motor or other machinery (including use as extender or additive to motor fuel)
• heating fuel

Read section 17 for a definition of use.

2.3 How the scheme works

If you are a warehouse keeper read section 4.2 to find when to submit HO34 returns.

Tied oil traders

Traders dealing in Category E oils (unless they qualify for class approval).

Read section 5.6 to find out how the scheme works.

Approved Distributor and User Scheme

Tied Oils delivered in containers greater than 210 litres or in bulk (including supplies by owners of oil stored in warehouse).

Individual approval is needed.

Read section 5 to find out how the scheme works.

Class Approval Scheme

Tied Oils delivered in containers of 210 litres or less (unless for import or export when individual approval is necessary), including supplies by owners of oil stored in warehouse.

Individual approval is not needed.

Read section 15 to find out how the scheme works.

Repayment User Scheme

Repayment when duty-paid oil is used.

Individual approval is needed.

Read section 16 to find out how the scheme works.

2.4 When relief is given

Wherever possible, we allow relief at the use or manufacturing stage.

2.5 When relief is allowed on oil used as a fuel

No relief is allowed on oil used as:

• a heating fuel
• motor fuel (including use as an extender or additive to motor fuel)

However, if you use light oil as furnace fuel in a vaporised or atomised form, you may get this at the rebated rate.

Read Rebate of duty on light oil used as furnace fuel (Excise Notice 184B) for more information.

2.6 When relief is allowed on oil used as a lubricant

Some lubricating oils and hydraulic fluids are liable to excise duty if they meet the gas oil, kerosene or fuel oil excise definitions.

In these circumstances we will allow relief for these oils if you use them for an eligible purpose. Many of these oils do not meet the definitions and a nil rate of excise duty applies. They are not covered by this scheme.

Contact the Mineral Oils Reliefs Centre at morcapprovalsteam@hmrc.gov.uk for help or advice if you are not sure if relief is allowed.

2.7 Oil recovered after entitlement to relief from duty

Any oil that has become entitled to relief and is later recovered, is liable to duty unless it is accounted for and disposed of to HMRC’s satisfaction (such as by eligible use or other officially approved arrangements).

There are legal restrictions on the incineration and deposit on land of substances which may cause an environmental hazard.

You must tell your local authority if you intend to destroy recovered oil.

2.8 Relief from Customs Duty

You may be able to get relief under the following arrangement on:

• hydrocarbon oils generally
• oil you have imported and put to a qualifying use in the UK in the manufacture of products for export — see Apply to delay or pay less duty on goods you import to process or repair
• certain oils you have imported for a prescribed use — see Apply to pay less duty on goods you import for specific uses

2.9 Use of tied oil to test engines and engine systems

You cannot get tied oils if you bench test engines in the research of fuels and lubricants and the oil is combusted during the test. We consider the combustion of oil to be used as a ‘fuel’, so full duty relief is not available.

Oil used in the testing and calibration of fuel systems where the oil is not combusted qualifies for relief under the Tied Oils Scheme.

2.10 Other uses that may qualify for relief under the Tied Oils Scheme

Unmarked kerosene used to manufacture firelighters and barbecue lighting fluid qualifies for the Tied Oils Scheme.

2.11 Diverting tied oil to a use that does not qualify for relief under the scheme

The law does not cover the diversion of tied oil to ineligible use (including supplies to customers who are not individually or class approved).

If you want to make a diversion, you must get approval from the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk, and pay any duty due before you deliver the oil.

We expect you to hold enough stocks of duty paid oil to meet your requirements for ineligible use.

If we consider that you are relying upon stocks of tied oil to meet these requirements we may cancel your approval as well as requiring immediate payment of duty for:

• the diverted oil
• any remaining stocks of tied oil

2.12 Non-resident traders delivering tied oil to traders within the UK

If you meet the conditions, you can deliver tied oil to traders within the UK if you’re a non-resident trader.

We will class you as a non-resident trader if you:

• do not have a business establishment or other fixed establishment within the UK
• are a trader who is an individual and your usual place of residence is outside the UK

A business establishment is usually premises where trading activities directly related to the business are carried out. This does not include premises where a business provides bookkeeping, accountancy or invoicing services on behalf of an overseas trader.

Contact the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk for more details.

2.13 Powers officers have

Our officers have legal powers to:

• enter and inspect premises
• inspect plants
• inspect, take account of, test and sample oil and other goods and be given information about them
• be given facilities to carry out an inspection
• be given accounts and other documents, and inspect and make extracts from them — see Excise Notice 206: revenue traders’ records for information about examination of records

2.14 What happens in an audit visit

We will usually contact you before making an audit visit to arrange an appointment. When making the appointment the audit officer will give a general overview of the:

• procedure to be followed
• documents that will be needed for the inspection
• expected duration of the audit

When our officer visits your premises, you must provide all facilities and assistance that we may need for checking the quantities of oil and examining the premises, records and documents.

The officer’s checks and enquiries may also cover oil and goods on the premises that may or may not be directly concerned with relief allowed under the terms of this notice.

When the audit is complete the officer will tell you their findings. We may then send you a formal letter.

2.15 Health and safety requirements

You must:

• meet legal health and safety rules and health and safety requirements laid down by competent authorities
• make sure that proper warning notices are displayed and that proper health and safety instructions are issued and followed by staff and visitors

If your employees use special equipment or protective clothing when carrying out any activity similar to that undertaken at your premises by our officers, you must provide similar equipment and clothing for our officers’ use.

2.16 When you will need a petroleum spirit licence

You need to make sure that operations have the proper licences.

We may need you to produce your petroleum spirit licence when you apply for approval or when we visit your premises to confirm that it is up to date and acceptable by checking quantities of oil stored at any one time.

You can get further information about petroleum spirit licences from your local licensing authority.

2.17 How to appeal against decisions made by HMRC

If you disagree with a decision made by one of our officers you may be able to:

• ask for a review of the decision
• appeal to an independent tribunal

Your decision letter will have more information.

If you accept the review offer but do not agree with the review decision you will still be able to appeal to the independent tribunal.

Find out more about how to disagree with a tax decision.

2.18 If you do not meet the requirements of the scheme

If you do not meet your obligations under the scheme you may be liable to a penalty — read section 3 for more information.

We may also cancel your approval where we think it is necessary to protect revenue — read section 6.10 for more information.

3. Penalties

3.1 When you will have to pay a penalty

You may be charged a penalty if you:

• put oil to a use that does not qualify for relief under Section 9 of Hydrocarbon Oil Duties Act 1979 without paying the duty first
• acquire or take into any vehicle appliance or storage tank oil delivered under the terms of Section 9 in order to put the oil to ineligible use
• supply oil having reason to believe that it will be put to a use not qualifying for relief under Section 9 of Hydrocarbon Oil Duties Act 1979, or mix oils that do not comply with the Hydrocarbon Oil Regulations 1973

3.2 Other sanctions

Depending on the circumstances of your case, we may also cancel your approval.

HMRC reviews each case separately.

3.3 How much the penalty will be

The amount of the penalty depends on the seriousness of the offence. You may:

• have to pay a penalty under Section 9 of the Finance Act 1994, and we may assess an amount equal to the excise duty on the oil at the rate in force at the time of the contravention
• be liable on summary conviction to a penalty of the prescribed sum or of 3 times the value of the oil in question whichever is the greater, or to a term of imprisonment not more than 6 months, or to both
• be liable on conviction on indictment to a penalty of any amount or to imprisonment for a term not more than 7 years, or to both

4. Warehouse keepers

4.1 What to do if you’re a warehouse keeper

Warehouse keepers do not need a separate tied oils approval, as your operations will be covered by your warehouse approval.

However, you must meet the delivery requirements in section 9 and you may also be required to submit HO34 returns. You must write to the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk to tell them you intend to submit return.

We consider tied oil released to owners who store oil in your warehouse as a delivery, and these deliveries must be meet the requirements in section 9.

4.2 When you will need to submit HO34 returns

You must submit HO34 returns if the amount of tied oil released from your warehouse (including oil released to owners who store oil in your warehouse) is more than 10,000 litres a year.

The returns must be submitted by the 14th day of the month following the end of the agreed accounting period.

Read section 13.17 for more information about returns.

4.3 Records you must keep

Your warehouse approval will need you to keep records relating to oils received into and released from warehouse. You can find more details in Motor and heating fuels general information and accounting for excise duty and VAT (Excise Notice 179).

If you need to submit HO34 returns, you must keep records to support the figures you have included on your return.

We also need you to keep a record of the names, delivery addresses and approval numbers of anyone receiving oil from your warehouse.

5. General information about the Approved Distributor and User Scheme

5.1 Who the scheme is for

This scheme is for:

• distributors of tied oil who wish to receive and supply it in containers greater than 210 litres, or in bulk in the course of a trade for eligible use (including owners of oil stored in warehouse to be delivered as tied oil)
• distributors and users who import or export tied oil (including owners of oil stored in a warehouse to be delivered as tied oil)
• users of tied oil who wish to receive it in containers greater than 210 litres, or in bulk to be put to an eligible use in the course of their business

If you’re a repayment user read section 16.

The scheme does not apply to:

• distributors who buy and sell tied oil in containers of 210 litres or less (unless they import or export)
• users who receive tied oil in containers of 210 litres or less (unless they import or export)

If you are one of these traders read section 15.

Read section 17 for a definition of an approved distributor and an approved user.

5.2 Distributor and user status

You can be both a distributor and a user, your approval certificate will cover all the activities you are authorised to carry out.

5.3 If you do not hold stocks of tied oil, or do not take physical possession of the oil

We will class you as a dry broker and you will be approved as a distributor if you do not either:

• hold stocks of tied oil
• take physical possession of the oil

As a dry broker you must still meet all the requirements of the scheme.

5.4 How to get approval as a distributor or user

Read section 6 to find out how to get approval as a distributor or user.

5.5 Conditions of the scheme

If you want to operate this scheme, you must meet the following general conditions in this section.

Law and the Regulations

For duties on mineral (hydrocarbon) oil in particular, you must not put tied oil to ineligible use without getting permission from the Mineral Oil Reliefs Centre first.

Read Motor and heating fuels general information and accounting for excise duty and VAT (Excise Notice 179) for a full list of the statutory rules relating to mineral oils.

Individual approval

You must be approved before you participate in this scheme (unless you qualify for class approval).

You must operate within the scope of your approval. For example, you should only deal in the categories of oil you have been approved for and only receive, store or use tied oil at your approved premises.

Read section 6 for more information.

Deliveries and receipts

All tied oil delivered to you as an approved person must be taken immediately into your approved premises, unless you are going to redeliver the oil immediately to another person authorised to receive it.

Distributors must get the approval number of their customer before supplying tied oil (unless they qualify for class approval).

You must also be satisfied that your customer is eligible to receive tied oil. If you are an approved user, you must supply your approval number to your supplier before taking delivery.

Read section 8 and section 9 for more information.

Production and recovery

Any oil that is produced from tied oil or recovered after eligible use of tied oil must be either:

• put to an eligible use
• delivered to another person authorised to receive it

Read section 11 for more information.

Measurement

When measuring tied oil, you must take an accurate account of the quantity you:

• receive
• store
• use
• destroy
• deliver

Read section 13 for more information.

Records

As a revenue trader, you must meet the Revenue Traders (Accounts and Records) Regulations 1992 and any extra record-keeping requirements mentioned in section 13.

Returns

Distributors and users must submit regular returns, if as a:

• distributor your estimated or actual throughput of tied oil is more than 10,000 litres a year
• user your estimated or actual use of tied oils is more than 10,000 litres a year
• warehouse keeper (including those who store tied oil on behalf of others) the estimated or actual deliveries of tied oil is more than 10,000 litres a year

If you are a distributor and user and the total of the oil you distribute is more than 10,000 litres a year you will need to submit returns.

Read section 13 for more information.

Discrepancies

You must account for any discrepancies that cannot be satisfactorily explained. If we are not satisfied with your accounting for any discrepancy we will ask you to pay the duty.

Read section 14 for more information.

5.6 Conditions that apply

These conditions apply to all tied oil traders.

However, if you deal only in the oils listed under category E in section 18, you will have to be individually approved (unless you qualify for class approval — see section 15) — you will not have to meet the requirements of the scheme that include submitting returns or getting and checking approval numbers before delivery.

We expect you to maintain normal commercial documentation as required by the Revenue Traders (Accounts and Records) Regulations 1992 to support your trade in these oils.

You should also deal with and pay the relevant duty for:

• any losses (see section 14)
• diversions to ineligible use, including diversions of Category E oils (see section 2.11)
• disposals of waste oil including used transformer oil (see section 11)

5.7 Other conditions you may have to meet

Depending on your activities we may impose special conditions in particular cases (for example, if you mix tied oils).

These special conditions will be on your approval certificate and you must meet them, as well as the general conditions of the scheme.

6. Individual approval for the Distributor and User Scheme

Before applying for approval you should read this section and section 15.

If you need to confirm the type of approval write to the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk.

6.1 Procedure for approval

You should apply for approval on form HO27.

You must return your completed application form in good time to allow for processing, delays may mean you have to buy duty paid oils.

6.2 Approvals for multiple premises and trading activities

We will issue one approval to a legal entity which will cover all of your relevant business premises and activities.

You will need to complete only one application form which must include details of your head office address and all the relevant premises and activities.

6.3 If you use temporary premises

If your business also carries out contract work on temporary premises you should include these premises on your application for approval.

These premises will also be subject to the terms and conditions of your approval.

6.4 If you will be a distributor and a user of tied oils

One approval may be granted to cover the use and distribution, separate approval will be needed for users and repayment users where different categories of oil are involved.

6.5 Approval for different categories of oil you distribute or use

The Tied Oils Scheme covers the 8 categories of oils shown at section 18 in lists A, B and C. You must apply for approval if you want to distribute or use any of these oils under the Tied Oils Scheme.

You will also need to seek approval for each type of oil by trade name within the ‘other light oils’ category in section 18, List A.

If you stop distributing or using a category of oil or type of light oil that you need for individual approval you must tell the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk.

You do not need to ask for approval or tell HMRC you have stopped distributing if you change to trading in different oil types within a category, unless it’s an oil within the other light oil category for which you need individual approval.

6.6 Applications to have approvals backdated

The law does not cover retrospective approvals.

If you have duty paid oil in stock you cannot reclaim the duty on these stocks unless you have an appropriate repayment user approval in place, and have taken the oil into eligible use after the effective date of approval.

6.7 Security for duty you will need to give

You will sometimes need to provide security for duty, read section 7 to find out more.

6.8 Changes to details specified on an approval certificate

You must tell the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk immediately with any changes to the details.

You should complete a new application form where there is a change of legal entity — we will cancel the existing approval and issue a new approval, if appropriate, to the new legal owner. Limited companies must submit their company registration details with the new application form.

You should write to the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk immediately for other changes, for example changes of:

• name
• address
• category of oil

6.9 Time limit on approvals

There is no time limit on approvals, it will be open ended until it is cancelled by you or HMRC.

6.10 Cancelled approvals

Approvals can be cancelled by you if you request it, or by HMRC if we think it is necessary.

We will cancel your approval if you stop the approved business or process. We may cancel it where we consider it necessary for the protection of revenue, for example, where you:

• deliberately or knowingly deliver tied oils to persons not authorised to receive them, or to persons for ineligible use
• persistently fail to meet the requirements of the scheme — for example, if you regularly fail to submit returns by the due date

You must not receive, use or distribute tied oils after your approval has been cancelled unless you have requested the cancellation and you meet the criteria of Class Approval (see section 15).

6.11 How to dispose of tied oil stock if your approval is cancelled

We will ask for proposals for disposing of tied oil in stock when you ask for your approval to be cancelled, or when we tell you we have cancelled your approval.

If you are unable to dispose of your stock under the terms of the scheme before your approval is cancelled, we may allow you to:

• divert the tied oil stock to ineligible use on payment of an amount equal to duty at the current rate
• run down your tied oil stock for a period of up to 2 years as long as you do not get any further supplies of tied oil

Apart from being unable to receive further supplies, your privileges and liabilities under the scheme remain unaffected until the approval is cancelled.

6.12 If you have duty-paid oil in stock at the time of approval

You must:

• exhaust your stocks of duty-paid oil
• keep separate stocks of duty-paid oil and of tied oil stocks
• request permission from the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk to operate common storage if you’re unable to segregate your duty-paid and your tied oil stocks (which is only allowed on a temporary basis only)
• meet the common storage condition in section 12.4 and section 12.5

You must not transfer duty-paid oil to tied oil status.

6.13 Duty-paid oil in stock when you cancel your repayment user approval

If you cancel your repayment user approval to become an Approved Tied Oils Trader or a Class Approved Trader, you must:

• exhaust your stocks of duty-paid oils and submit a final repayment claim within 3 months of the date of authorisation as a Tied Oils Trader or Class Approved Trader (claims received after the 3 month period will not be accepted)
• keep separate stocks of duty-paid oil and tied oil
• request permission from the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk to operate common storage if you are unable to segregate your duty-paid and tied oil stocks (which is allowable on a temporary basis only)
• meet the common storage conditions set out in section 12.4 and section 12.5
• use duty paid oil first

6.14 Recovering oil from your process after your repayment user approval has been cancelled and altered to a Tied Oils Trader approval

You can include any oil covered by your repayment user approval that you have made a claim for and later recover from process after the effective date of your revised approval in your tied oil stock.

7. Financial security of the Distributor and User Scheme

7.1 Financial security requirements

Since 1 January 2002, financial security has been mandatory for all ex-warehouse movements of duty suspended excise goods in free circulation.

For more information read:

• Motor and heating fuels general information and accounting for excise duty and VAT (Excise Notice 179)
• sections 7.2 and 8.4 of Receive goods into and remove goods from an excise warehouse (Excise Notice 197)

7.2 Requirements to provide security for movements of tied oil

There is no routine requirement, but we may request a guarantee for movement of tied oils if any of the following apply:

• if tied oils are despatched under Northern Ireland and intra-EU movement arrangements
• you have not dealt in tied oils previously
• you are dealing in oils that we consider to have a high risk of misuse
• we consider there is a risk to revenue
• you have a very poor compliance record
• your business is known to be in financial difficulties

Any security for duty must cover all aspects of your tied oil activities from receipt to satisfactory disposal.

7.3 How a security guarantee must be made

Security will normally be in the form of a guarantee underwritten by a third party.

We may accept a cash deposit where the calculated guarantee penalty is low, or to cover a one-off transaction.

If you want to make a cash deposit instead of a guarantee you should contact the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk, you’ll need to include an undertaking to follow the conditions of the guarantee which you would otherwise have to give.

No interest is payable on these cash deposits.

A cash deposit is not acceptable when provision of a guarantee is mandatory.

Even where exemptions have been allowed, for example for bulk maritime movements of mineral oil, these are discretionary and we may impose a security requirement if we consider it necessary.

7.4 How much a guarantee will be for

The amount of the guarantee will be based on an estimate of the revenue at risk (estimated throughput over a given period of time).

We will regularly check to see if a guarantee is still needed.

7.5 What a guarantee will relate to in your business

Premises guarantees may apply in respect of your premises — Receive goods into and remove goods from an excise warehouse (Excise Notice 197) covers this in more detail.

8. Getting and importing tied oil for a Distributor and User Scheme

8.1 How to get tied oil in the UK

To get tied oil from a UK duty-suspended installation (warehouse) or individually approved distributor, you should:

1. Give your supplier your approval number — your supplier cannot supply you with tied oil without it.
   
   
2. Give further information when requested about your approval to your supplier. Your suppliers must be sure that you are getting tied oil for an eligible use so they may ask for other details regarding your approval. For example, they may want confirmation that you are approved for the oil you have ordered. It is in your interests to give this information. If your supplier is not satisfied, they must supply the oil duty paid.
   
   
3. Clearly indicate each time you order that tied oil (and not duty-paid oil) is required.
   
   
4. Make clear the quantities of each category required if you make an order that is partly of tied oil and partly of duty-paid oil.
   
   
5. Authorise your supplier to deliver to you specific quantities of tied oil and duty-paid oil already mixed if you store together tied, and duty-paid oil of the same description (see section 12.4 and section 12.5).

8.2 Approval to import tied oils

You must be formally approved as a Tied Oils Trader if you want to import tied oils into the UK (read section 6 to find out how to get approval).

This also applies to traders who either receive or supply tied oil in containers of 210 litres or less, and who would normally fall under the Class Approval Scheme.

8.3 Special arrangements regarding imports of tied oil into duty suspension

Read Motor and heating fuels general information and accounting for excise duty and VAT (Excise Notice 179) if you import tied oil into a Duty Suspended Installation.

8.4 How to import tied oil

If you import tied oil you must give a separate import declaration on form C88 (Single Administrative Document (SAD)).

Your import agent can submit this for you. You will need to pay all customs duties and import VAT when making the declaration.

The customs entry procedure is shown in the UK Trade Tariff: volume 3, use the Customs Procedure Code 40 00 018.

8.5 Include imports on the HO34 return form

If you are required to submit returns, you must show imported tied oil as a receipt during the relevant period in Box 3.

9. Delivering and exporting tied oils in the Distributor and User Scheme

9.1 Things you must consider before delivering tied oil

You should make sure:

• you are approved to deliver the tied oil requested by your customer
• you have no reason to believe that the customer is not entitled to receive tied oil
• you get certain details about your customer’s approval (see section 9.2) — if your customer falls under the Class Approval Scheme you do not need to get any approval details (but you can only deliver in containers not more than 210 litres)
• your delivery system takes account of our requirements and is complete, so it forms a good basis for our audit purposes and so the HO34 return can be completed (if required)

9.2 Reasonable steps you’ll be expected to take to verify a customer’s approval details

We expect you to check a customer’s internet site or contact the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk before delivery to:

• make sure the number is a valid number
• confirm the delivery address given by your customer
• confirm your customer is approved for the oil they have ordered from you

Contact the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk if you:

• have concerns about the approval number used by your customer
• have concerns about the eligibility of your customer to receive tied oil
• are unable to access their internet site

9.3 Approval detail checks you should make when making a delivery to a customer

We would expect you to check the approval details:

• the first time you deal with a particular customer
• at specified intervals for regular customers — for example, we would accept a yearly check on regular customers as reasonable unless they order a new category of oil during the year
• if you have any doubts about the eligibility of your customer to receive tied oil

9.4 What to do if any of the approval details are not valid

If you have checked your customer’s internet site and have confirmed with the Mineral Oil Reliefs Centre that they have either not applied for approval or are not approved at the premises they have given you or for the oil they have ordered, then you must not supply your customer with oil under the scheme.

You should supply the oil duty paid instead.

9.5 Records you must keep that you have carried out checks

If any of the details are invalid, you should note in your records the date you checked your customer’s internet site and contacted the Mineral Oil Reliefs Centre.

You should also request the name of the person you contacted.

9.6 What will happen if you do not check your customer’s details

If you deliver tied oils to a person who is not approved (either individually or class approved), you may make yourself liable to a penalty.

We may also consider withdrawing your approval.

Any decision to withdraw approval will be based on your overall compliance with the requirements of the scheme.

9.7 Delivery procedures you must follow

We expect you to issue to the customer for each consignment of tied oil a delivery note or similar document containing the:

• address of the premises from which the oil is removed
• date of delivery
• description and the quantity in litres
• name of the customer and the address of the premises to which the goods are sent
• identifying particulars of the packages, or, in the case of bulk deliveries, of the conveying wagon or craft
• statement: ‘This oil has not borne excise duty and may not be used as heating fuel, motor fuel or additive or extender to motor fuel’
• customer’s approval number unless the customer is class approved (see section 15.6)

9.8 How to deal with tied oil deliveries to UK duty-suspended installations

You should include these deliveries in Box 7 of the HO34 return.

You must also keep all trade records and other documents relating to these movements even if you do not have to submit returns.

9.9 Delivery documentation if you are a warehouse keeper

You will have to follow the same procedures shown in section 9 if you’re a warehouse keeper.

9.10 Approval to export tied oils

You must be formally approved as a Tied Oils Trader if you want to supply tied oils to persons outside the UK (see section 6 to find out what to do to get approval).

This also applies to traders who:

• either both receive and supply tied oil in containers of 210 litres or less
• would normally fall under the Class Approval Scheme

9.11 Export tied oil from a duty suspended installation

If you supply tied oils from a Duty Suspended Installation these procedures are covered by Excise Notice 179.

9.12 Export documentation you have to complete

If you export tied oil a separate export declaration is required from you on form C88 (SAD), which may be made by your export agent. See Notice 275 Export procedures for further information. If you are based in Northern Ireland and export tied oils to the EU, there is no requirement for an export declaration. But some tied oils are covered by the intra-EU movement requirements for excise goods introduced in 1993. These oils are listed in section 19 and you must be approved as a tax warehouse before you can export them free of excise duty. You must apply in writing to the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk to arrange this approval.

The general procedures that apply to Northern Ireland and intra-EU duty-suspended movements are in Receive goods into and remove goods from an excise warehouse (Excise Notice 197).

For tied oils falling outside the scope of the requirements introduced for Northern Ireland and intra-EU movements of excise goods from 1 January 1993, the procedures you must follow vary depending on the Tariff classification of the oil and the member states involved.

ContactFor Excise:more enquiriesdetails forcontact moreHMRC. details. Commercial documentation that shows the customer’s name, the date of sale and the oil delivered will be enough (for example, delivery documents, sales invoices and transport documentation).

9.13 Evidence of exportation required

You must keep all trade records and documents relating to goods exported.

You must obtain evidence of the exportation or shipment as stores of tied oil or you will risk a duty charge (and possible penalties) being imposed. Evidence of exportation acceptable to support your VAT return would suffice for tied oil purposes.

For goods removed from a warehouse under duty suspended movement arrangements you will need to obtain from the customer a receipted copy 3 Accompanying Administrative Document (AAD).

You should retain evidence of removal as stipulated in Notice 206 Revenue Traders Records.

For goods that have been subject to Inward Processing Relief see Notice 221 Inward processing relief for further advice.

9.14 Showing exports on your HO34 return

The total quantities of each description of tied oil delivered for exportation or shipment as stores must be included on distributors’ return form HO34 for the relevant period. Export consignments are to be entered in item 9 of the return.

9.15 Security for duty

This relates to Northern Ireland only. You will need to give a financial guarantee for oils despatched under UK and intra-EU movement arrangements (read section 7 for further advice).

10. Operations for distributor and user schemes

10.1 Why oils are marked

We need certain oils to be marked because the difference between the full ‘on-road’ duty rate and the rebated ‘off-road’ duty rate means ‘off-road’ oils could be misused as fuel in road vehicles.

Marking oil when duty has been paid on it at the ‘off-road’ rate helps stop it being misused.

10.2 Oils that must be marked

Oils that could be used as road fuels either alone (for example, gas oil and light oil) or together with road fuel (for example, kerosene) must be marked.

HMRC requires marking of kerosene, and marking and dyeing of:

• gas oil
• light oil for use as furnace fuel — read Rebate of duty on light oil used as furnace fuel (Excise Notice 184B) for more information

All oils that could be used as road fuels will also have to be marked with Solvent Yellow 124 (Euromarker) either:

• as they pass the duty point
• at Remote Marking Premises

10.3 Tied oils

Most oils delivered as tied oils do not need to be marked (including gas oil and kerosene delivered as tied oils).

Oil delivered to be used as furnace fuel must be marked and dyed if appropriate, read Rebate of duty on light oil used as furnace fuel (Excise Notice 184B) for more information.

We may also need waste tied oils that will be used as furnace fuel to be marked when it is contaminated.

10.4 Restrictions on mixing oil

There are legal restrictions on the mixing of certain oils of different duty rates and there are penalties unlawfully mixing oil.

Unless you have specific approval from HMRC, if a rebate of duty is not allowed on oil you must not mix it with:

• fuel oil, gas oil, kerosene or light oil on which a rebate of duty has been allowed
• oil which has been delivered for home use without payment of duty

10.5 Blending or mixing tied oil

The mixing or blending of tied oil with other oils or substances does not qualify as eligible use if:

• the process of mixing or blending does not demonstrably affect the performance of the resultant products
• contribute to their suitability for eligible use

When the product of blending or mixing is to be supplied for eligible use an individual tied oil approval specifically permitting blending or mixing is needed.

If you are a new trader you should complete form HO27 and follow the instructions in section 6.

We will give approval to mix or blend when you receive your approval certificate. If you are already approved you should give details in writing of the operations you carry out. We will grant you approval in writing.

If you have any queries contact the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk.

10.6 Rules for users and distributors

There are different rules for users and distributors.

Distributors

If you are approved only to distribute tied oils, you should not mix or blend oils unless the Mineral Oils Reliefs Centre has confirmed you can do so.

Users

If you are approved to use tied oils, you may mix together:

• different categories of tied oil
• different types of tied oil within a category
• tied oil with duty-paid oil
• rebated oil
• duty free oil for the purpose of eligible use

You must show the proportions of the different constituents of any mixture in the appropriate stock account.

If you are an approved user and a repayment user and you put a mixture of tied oil and duty-paid oil of different descriptions to eligible use, you can make a claim for repayment of duty for the duty-paid element only.

If you want to mix oil but have questions about these arrangements, contact the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk before mixing the oil.

10.7 Mixing tied oil for use as road fuel

Oils delivered conditionally relieved of duty for eligible use under the terms of this notice should not be mixed for use as motor fuel (including additive or extender to motor fuel) or heating fuel.

10.8 Accidentally mixing tied oil

You must contact the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk immediately if there is accidental mixing that you are responsible for. Include the following information:

• particulars of the quantities and descriptions of oils mixed
• the circumstances of mixing
• how the mixture has been disposed of
• the nature of your business
• details of the premises where the mixing took place

The Mineral Oils Reliefs Centre will tell you what to do.

10.9 Tied oil for repackaging and eligible user

If you repackage oil (including packing it into closed containers with less than a 210 litres capacity) this is not a qualifying use for the purposes of the Class Approval Scheme.

However, you may qualify for approval as a distributor. Read section 5 for details of the conditions of the scheme.

11. Waste oil and distributor and user schemes

11.1 What waste oil is

Waste oil is tied oil that has been used by you in your manufacturing process which is no longer fit for its original purpose. It is considered to be waste oil. Although you may not make any further use of the oil yourself, someone else may be able to.

As tied oil has been relieved of duty, you must properly account for its disposal.

11.2 How you can dispose of waste oil

You have 6 options to dispose of waste oil.

Option 1

You can return the waste oil to your own approved storage for eligible use.

No further action will be needed.

Option 2

The waste oil can be delivered to an Approved Tied Oils Trader for eligible use or distribution in accordance with section 9.

No further action will be needed.

Option 3

The waste oil can be laundered at your approved premises, where tied oil is extracted from your processing plant for re-use, cleaning, decontamination or purification.

The waste oil can also be laundered at other unapproved premises, where the oil is removed for cleaning and is returned to your premises. The oil must remain at your property during this time. If it is not then it is considered to be a diversion to ineligible use and duty must be accounted for, before it is removed from your premises.

You must not divert oil to ineligible use without getting approval from the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk first.

Duty must also be paid if we grant approval.

Option 4

The waste oil can be burnt as furnace fuel by you or delivered by you to a furnace operator for use as a furnace fuel.

Before burning recovered (waste) oil to produce a useful heat as light furnace fuel (tax type 521) or fuel oil (tax type 561), you as the approved person must:

• have a concession with HMRC to use or supply recovered (waste) oil in these circumstances — contact the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk for details of how to apply for this concession (section 11.3)
• pay the duty to HMRC — payment of duty is at the rebated rate for the use of both light oil and heavy fuel oil

Option 5

The waste oil can be used as heating fuel or as fuel in a non-vehicle engine.

If the waste is ‘other heavy oil’ which is not kerosene, gas oil or fuel oil, the rebated rate of excise duty for fuel oil when used as heating fuel (tax type 540) or the full rate of duty when used as road fuel (tax type 541) will be due.

Find out how to pay or secure the excise duty in advance of supply or use in section 11.8 of Motor and heating fuels general information and accounting for excise duty and VAT (Excise Notice 179).

Option 6

The waste oil can be destroyed — either at your own premises or at a contractor’s premises.

Where tied oil is destroyed at your own premises you must keep acceptable records of the destruction.

If tied oil is destroyed at a contractor’s premises you must get a certificate of destruction from your contractor. If any useful heat is gained during the process of destruction, duty must be accounted for.

Contact the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk for further advice.

11.3 How to apply for the concession to burn recovered furnace fuel

You must apply in writing to the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk to burn recovered (waste) oil. Your application should include:

• your present method of disposing of waste tied oil
• the full details of the method of burning you intend to use (you do not need to submit technical descriptions or drawings)
• the estimated annual quantity of oil to be burned or disposed of
• name and address of the waste oil dealer when disposal is to be for use as a furnace fuel

11.4 How to dispose of used transformer oil and electrical insulating oil

Oil which has been used in transformer equipment (usually electrical transformer oil) or electrical switchgear (usually electrical insulating oil), is considered to have been relieved of duty during the time it has been used within the equipment. When it is removed from the equipment it becomes liable to duty, unless evidence of duty payment can be produced.

If you use transformer and electrical insulating oil (including electricity companies and transport undertakings such as railways) you must make sure that they are approved either as a distributor or a user in order to use or distribute the waste oil. You should complete a form HO27 and submit your application for approval by following the instructions in section 6.

You, as the approved person, must make sure used transformer and electrical insulating oil is properly accounted for as follows:

• returned to a duty-suspended installation (including entered premises of waste oil recoverers)
• returned to the tied oil stocks of an approved person for eligible use
• destroyed and a certificate of destruction kept
• delivered for use as a furnace fuel and the appropriate duty accounted for (section 13.27 and section 13.28)

If you want to divert transformer oil to ineligible use, you must apply for permission from the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk and account for and pay the duty before disposal.

12. Storage and the Distributor and User Scheme

12.1 Storage requirements for tied oil

Premises

You must confirm the premises where you will store and used tied oil on form HO27 (application for approval).

Storage and use of tied oil must be entirely on approved premises.

Stock control

Good stock control of tied oil is essential. It should be possible to take physical stock of tied oil readily and without risk of any stock being left off your records or HO34 return.

12.2 Segregating tied oil and drawback goods

Oil relieved of duty under this scheme is not entitled to drawback when it is exported. It must be segregated from oil entitled to drawback and be agreed by HMRC.

We may allow you to operate an exhaustion account procedure for goods in stock and entitled to drawback at the date of approval. Contact the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk to find out more.

12.3 Segregating tied oil and duty-paid oil

Barrels and drums

Tied oil and duty-paid oil must not be stored in the same barrels or drums.

If packaged tied oil and duty-paid oil are stored in one place, the tied oil must be clearly identified at all times.

Storage in bulk

We would normally expect you to segregate tied oil and duty paid oil in bulk storage. Read section 12.4 and section 12.5 if you are unable to.

12.4 Operating a ‘common storage’ system

If your business involves storing tied and duty-paid oil of the same type and strict segregation of bulk tankage would be difficult, you may operate a ‘common storage’ system.

You must write to the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk to get their agreement to do this. You will need to show that your stock control and record keeping systems give enough audit assurance.

12.5 Conditions that apply to common storage

You must:

• only put tied oil into common storage with duty-paid oil of the same description
• record accurately the quantities and descriptions of oil received, used and delivered
• keep separate accounts of each description of tied oil in common storage with duty-paid oil, in a form agreed with HMRC
• keep extra accounts as required by HMRC when oil is drawn from a common stock before allocation to the account of tied or duty-paid oil (see section 13.9
• allocate to the account of tied oil in a common stock only the proportion of the total deficiency in common stock HMRC allows (see section 14.12)
• only supply tied oil for eligible use or for supply to persons entitled to receive tied oil
• always keep enough duty-paid oil in common storage to supply the quantities needed for ineligible use and to supply anyone not entitled to receive tied oil

12.6 Taking tied oil into process before knowing if tied or duty-paid oil is required

We would normally expect you to maintain enough stocks of duty-paid oil for any operation where oil is put to ineligible use.

However, if you draw tied oil from stock and at that time of drawing you do not know if tied oil or duty paid oil is needed, we would call this oil for ‘indeterminate use’.

For example, oil can be required for making multipurpose products which may later be supplied to approved users who need tied oil, or to repay users or other persons who must be supplied with duty-paid oil.

Read section 13.13 for more details of how you should account for oil put to ‘indeterminate use’.

13. Accounting for tied oil in the Distributor and User Scheme

13.1 When you must take account of tied oil

The conditions of your approval need you to take account of the actual quantity of each description of tied oil on each occasion when it is:

• received at your approved premises
• drawn from storage
• removed from your processing plant
• delivered to another person

You must also take account of the actual quantities stored at the premises specified in your approval either:

• on regular stocktaking
• at the end of each accounting period

Generally we expect that stock is taken at least 4 times a year and that commercial accounting periods are approximately every 3 months.

If you are following a different process you must tell the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk.

13.2 How to measure oil for accounting purposes

You must maintain your accounts consistently in either:

• standard litres (that is, litres at 15°C)
• bulk litres
• units of weight when oil is invoiced on that basis

13.3 Measuring oil on the same basis it was supplied

You must measure oil on the same basis it was supplied to you.

If you want to keep your records or make returns or claims on a different basis from how the oil was invoiced to you, you must get agreement from the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk first.

HMRC will need to know that:

• conversion factors will be applied accurately and consistently
• suppliers’ delivery notes for oil traded primarily by weight will also show either the quantity in litres (specifying standard or bulk as appropriate), or both the weight and the factor for conversion to standard or bulk litres
• any conversion factor used in calculating quantities for payment or repayment of duty will be the same factor as that used in any previous conversion of the same oil (for example, litres to weight on receipt)

13.4 What to do if you cannot measure oil using the HMRC methods

If you cannot use the measuring methods described in section 13.2 we may agree that measurements can be taken by referring to the decreasing quantity of oil in stock.

You should measure your use by this method for each operation or at regular operational intervals. The method and frequency will be decided according to your normal commercial practice, you will need to show HMRC that it gives a good basis for revenue control.

You must get agreement with the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk first. We will not give agreement if you operate a common storage system.

13.5 How to account for any measurement deficiencies

Read section 14 to find out how to account for any shortages.

13.6 Records you must keep

As a revenue trader you must meet the Revenue Trader (Accounts and Records) Regulations 1992. Read Excise Notice 206: revenue traders’ records to find out more about these general requirements.

When your commercial records meet our requirements, we will not ask you to keep any more records.

When we believe there is an increased risk to the revenue we may need you to keep more detailed records. For example, where we authorise different types of approval for oils of the same category (that is, as a user and as a repayment user) we may need you to keep more records to give a clear audit trail for each type of approval.

We will tell you of this either when you are approved, or after a visit by one of our officers. You will also have to maintain these extra records in a form that is acceptable to our officer.

13.7 Receipt and delivery records you must keep

For each consignment of tied oil you must keep the:

• description and actual quantity of each oil in the consignment
• date of receipt or delivery
• name and address of your supplier or customer
• customer’s approval number, except where the delivery is made to a class approved person under the terms of section 15

13.8 Stock accounts you must keep for segregated stocks

We expect you to keep a stock account in a form that can be balanced readily at each stocktaking. You must keep:

• separate stock accounts to be kept for each description of tied oil, or mixture of oils stored in the approved premises
• the account for mixtures to show the position for each constituent oil
• the increase or decrease at each stocktaking to be worked out and shown in the account

13.9 Accounting requirements if you operate common storage

As well as the general record-keeping requirements, you must also keep records that allow you to meet the conditions under which common storage is allowed — see section 12.5.

Your records must show that the quantities you draw from common stock for uses:

• where duty paid oil must be used or delivered are at no time greater than the balance of the duty paid oil of that description and category (that is, packaged or in bulk) shown in the common stock accounts
• as tied oil are only put to eligible use or supplied to a person entitled to receive oil, unless the oil is accounted for by indeterminate use as explained in section 13.13

13.10 Stock accounts you must keep if you operate common storage

You can keep one common stock account for oil of the same description that is stored in separate tanks.

However, oils that differ only slightly must still be treated as separate descriptions of oil with a separate common stock account if you make any operational distinction between them.

Where packaged (for example, in drums or barrels) tied oil and duty paid oil are stored in one place:

• tied oil and duty paid oil must not be stored in the same barrels or drums
• tied oil must be clearly identified at all times
• you must keep separate accounts for packaged oil — it must not be included in your records for tied oil and duty paid stock in bulk common storage, you should record actual quantities that are in stock and have been disposed of and not apportion as you would for bulk common storage

We would not expect losses from packaged storage unless there have been exceptional circumstances.

13.11 How to operate a bulk common storage account

You must balance the accounts at the end of each accounting period:

• enter the total common stock as found at stocktaking
• work out the total loss to balance the common stock
• apportion the total loss between tied and duty paid oil in proportion to the respective total quantities
• work out the stocks of tied oil and duty paid oil to balance the accounts of each

13.12 What to do if you work out a negative stock balance

Approved distributor

If your records for either bulk or packaged storage show a negative balance of either tied oil or duty paid oil, you must take immediate steps to correct the situation and prevent it happening again. We may need you to give a written explanation.

Approved user

Duty paid oil — if you normally maintain a substantial balance of duty paid oil in your common stock, an occasional negative balance in either bulk or packaged storage of duty paid oil may be overlooked if it is due to exceptional circumstances. If you normally maintain only a small balance of duty paid oil, you must take immediate steps to correct the situation and prevent it happening again. We may issue a written warning if you have a repeated negative balance of duty paid oil.

Tied oil — a negative balance in either bulk or packaged storage of tied oil in the common stock account must be corrected at the first reasonable opportunity. If you receive further supplies of duty paid oil into a common stock where there is a negative balance of tied oil without making arrangements for receipt of tied oil, you must write off the negative balance by restarting the stock account as wholly duty paid oil.

13.13 How to account for oil for ‘indeterminate use’

Where we have agreed to ‘indeterminate use’ you must keep records for each type of oil used, to account for all drawings until the oil is finally used as tied oil or duty-paid oil.

If you later use the oil for an ineligible purpose or divert the oil to ineligible use, you must pay the duty before disposal.

13.14 Special accounting arrangements for oil packed for delivery under class approval

If you receive and deal with oil packed into containers for delivery to class approved persons under the terms of section 15, you need not bring it into your revenue accounts and returns unless you decant it from the containers and store it in bulk.

You may record it in your accounts as delivered at the time of segregation if you:

• pack oil into closed containers of no more than 210 litres capacity for delivery to class approved persons under the terms of section 15
• segregate it from other oil in anticipation of delivery to class approved persons under the terms of section 15

If you have to be approved because you import or export oil in closed containers of 210 litres or less, we would expect you to keep the same accounting records as would apply if you were making bulk deliveries.

13.15 How to account for tied oil stock on cancellation of approval

You must:

• tell the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk immediately of the date when your tied oil stocks are cleared
• make sure the exhaustion of tied oil holdings are substantiated in your records, to establish that stocks have been satisfactorily accounted for or the duty paid
• submit a final return for the period up to the cancellation date of your approval if you’re a trader who must make returns on HO34 return — the return must be submitted within 14 days of the date of cancellation
• make sure when a change in the legal ownership of an approved business results in the termination of an existing approval and the issue of a fresh approval to the new legal owner, tied oil stocks are satisfactorily accounted for as tied oil — or duty paid thereon — at the time of cancellation of the former approval

13.16 How long to keep records

You must keep your records for 6 years unless you have written to the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk and they have allowed you to keep and preserve the relevant records for a shorter period.

Working records (where entries are made at the time of each transaction and from which the permanent records are posted) should be kept for as long as HMRC agrees.

13.17 When to submit a return

Approved distributors (including approved dry brokers)

A return is needed if estimated throughput of tied oil for distribution (based on deliveries) is more than 10,000 litres a year.

Approved users

A return is needed if estimated use of tied oil is more than 10,000 litres a year.

Approved distributors and users trading in Category E oils

A return is not needed for Category E oils. However, if you also trade in other tied oils and your estimated throughput of these oils excluding the Category E oils is more than 10,000 litres a year, you will have to submit returns for these other oils.

Warehouse keepers

A return is needed if estimated throughput of tied oil released from warehouse (including releases to owners of oil in warehouse) is more than 10,000 litres a year.

Owners of oil stored in warehouse

A return is needed if estimated throughput of tied oil released from warehouse is more than 10,000 litres a year.

Distributors and users

A return is needed if the total of the oil you distribute and use is more than 10,000 litres a year.

13.18 How to work out if you need to submit returns

We expect you to monitor your throughput monthly on a rolling 12 month basis. At the end of any month, if your throughput for the previous 12 months or less is more than 10,000 litres you must contact the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk immediately to start submitting HO34 returns.

If at any time you become aware that your throughput will be more than 10,000 litres in the next 12 months, you must contact the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk on the date you first had grounds to believe you would go above the threshold.

13.19 If you do not monitor your turnover

If we discover that you have gone above the threshold for submitting returns and have not informed the Mineral Oils Reliefs Centre, we will consider cancelling your approval to trade in tied oils.

13.20 Which return to submit and when to submit it

The Mineral Oils Reliefs Centre must receive a completed and signed official form HO34 (dry brokers must submit HO34DB) by the 14th day of the month following the end of each agreed accounting period.

Returns will be audited.

13.21 What to include on the return if you operate common storage

Traders operating common storage must include only tied oil on the HO34 return. Include the adjusted figure for eligible use at Item 7.

13.22 Submitting separate returns if you trade from a number of approved premises under a single approval

The requirement to submit returns depends on the aggregate throughput of all the premises included in your approval, see section 13.18.

Traders must submit returns for more than one premises in a single consolidated return. The one return must cover all of the premises that you are approved for. Your supporting records should cross reference to the return and must be kept for the individual premises.

13.23 What accounting period to use

We expect returns to be submitted at least every 3 months.

We will accept commercial accounting periods of around every 3 months as long as this gives a satisfactory basis for official control.

However, you will have to apply for approval to use non-standard tax periods:

• when you submit your application for approval
• if you want to change from standard period dates

We may need returns more regularly when we consider there is a high revenue risk.

13.24 What will happen if you do not submit your returns

If you regularly send returns in late we may withdraw your approval to trade in tied oils.

13.25 Who must sign the returns and any other documents required

Returns and all other statements, certificates and notifications relating to the Approved User and Distributor Scheme must be signed by either the:

• approved person
• proprietor or a partner (or a director or company secretary for a limited company)

You may authorise a different signatory from your accounts staff. If you wish to make changes to your approval, including authorising a different signatory, you need to contact Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk.

If approved, the Mineral Oils Reliefs Centre will update your approval to compare with the documents you submit.

13.26 When you will have to pay duty

The scheme should result in no payment of duty being necessary. However you must pay duty immediately if:

• you divert tied oil to ineligible use
• you supply to a person who is not authorised to receive oils
• there is any loss of tied oil (for example, in transit, in your process or from your stock) which cannot be satisfactorily accounted for or explained — see also section 14.7 and section 14.15
• you do not get valid approval details from your customer
• you dispose of waste tied oil outside the scheme — see section 11

13.27 How to work out the duty that is due

You must work out the duty payable by referring to the:

• actual quantity of tied oil put to ineligible use
• rate of duty operative at the date of use or disposal

If you are calculating duty on a discrepancy see section 14.

13.28 How to pay the duty

You must tell the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk immediately when duty is due.

They will consider the circumstances and give directions on the payment and accounting procedure to be followed.

13.29 Paying VAT on tied oil

VAT is chargeable on the value of the excise duty amount that falls due if tied oil put to ineligible use after supply (see section 13.26 and section 13.28).

VAT is invoiced on the supply in the normal way and is recoverable by the customer under the normal input tax rules, if tied oil is supplied to eligible home use from distribution or duty suspended premises.

VAT is not chargeable (as no supply has taken place) if tied oil is:

• legitimately lost in process or in duty-suspended storage before supply
• lost in transit — for example, short delivered

14. Discrepancies in distributor and user schemes

14.1 Recording losses and other discrepancies

You must take full and accurate account of the oil:

• delivered to you
• used or supplied by you under your approval

If you’re a distributor or user who must submit returns you should record discrepancies on a HO34 return.

Class Approved Traders must also record discrepancies and should follow the directions of this section. If duty is payable, you must pay immediately using a form W50. You can get one from:

• Excise:Fuel Duty: enquiries
• the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk

14.2 What to do if more oil is delivered than what was ordered

Generally, the supplier is responsible for quantities delivered in excess of those ordered.

As long as you account for the excess and dispose of it correctly we are unlikely to need any further information.

We will investigate when the amount of the excess indicates an error or inaccurate methods of accounting.

14.3 When a deficiency will arise

A deficiency arises when the quantity is less than the quantity that ought to have been found when you took the previous account of the oil.

14.4 Paying duty on deficiencies

If a deficiency cannot be accounted for due to natural wastage, temperature variation or tolerance in accounting (for example, dipping tolerance) this is classed as an ‘excess deficiency’.

You must account for and pay the duty on the deficiency at the appropriate duty rate.

Read section 14.5 for more information.

14.5 The different types of chargeable (excess) deficiencies

Chargeable deficiencies are the total of:

• oil lost through accident or theft (see section 14.6)
• losses in process that are more than the amount agreed with HMRC (see section 14.7)
• losses made during laundering, if oil was not put to eligible use before and after recovery (see section 14.8)
• storage losses that are more than the amount agreed with HMRC (see sections 14.9 to 14.11)
• losses in transit (see sections 14.13 to 14.15)

14.6 Oil lost through accident or theft

You must make an immediate record of any accident or abnormal circumstances that lead to the loss or destruction of oil that you have not paid duty on.

You must contact the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk immediately:

• about any loss that is more than the agreed factor
• with your explanation of how it happened

14.7 Losses in process

We recognise that there will be some unavoidable wastage of tied oil during its eligible use, but you should take steps to make sure that there is no unnecessary wastage.

As losses will vary considerably for different processes, HMRC will decide a waste factor appropriate to your process with you.

You must contact the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk immediately:

• about any loss that is more than the agreed factor
• with your explanation of how it happened

14.8 Losses during laundering

These are entitled to relief from duty, as long as the oil was put to eligible use before recovery and is later put to eligible use, or taken into stock for eligible use.

Duty will be payable on losses in any other circumstances, and you must tell the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk immediately about any laundering loss not covered by this guidance.

14.9 Accounting for losses in storage

We expect your control of tied oil in storage to be enough to:

• make sure accounting is accurate
• prevent improper diversion or misuse

Where possible, we will agree with you a normal percentage loss appropriate to your method of storage and handling, and the type of oil stored.

14.10 How to account for losses in storage if you’re an approved user

If you measure your drawings from stock you must record any losses, along with your explanation.

You must contact the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk immediately:

• about any loss that is more than the agreed factor
• with your explanation of how it happened

14.11 How to account for losses in storage if you’re an approved distributor

If you keep stock you must tell the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk immediately, and give an explanation, of any storage losses:

• during the first 12 months of approval, when the loss is 1% or more of the initial stock plus receipts
• after the first 12 months of approval, when the average percentage loss in any accounting period is 0.5% or more
• when the loss in any accounting period is more than the average for the previous 4 accounting periods by 0.5%

If you are a dry broker (see section 17) and keep no stock you must tell the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk immediately:

• about all losses
• your explanation of how it happened

14.12 How to account for losses in common storage

You can either:

• allocate to the duty paid account — you must allocate actual losses (for example, from a burst pipe) that arise on receipt of a consignment of duty-paid oil, or when drawing from stock for ineligible use, to duty-paid oil
• allocate to the tied oil account — you must allocate actual losses on receipt of tied oil, or when drawing oil for eligible use, to the tied oil account
• apportion between the duty paid account and the tied oil account — you must apportion all other losses as shown section 13.11 regarding operation of bulk storage accounts

14.13 Definition of a loss in transit

A transit discrepancy is the difference between the quantities per consignment recorded by the consignor (the person supplying the oil), and the consignee (the person receiving the oil).

Where an order is carried out in several consignments, you should consider each consignment separately when calculating transit discrepancies.

14.14 Who is responsible for a loss in transit

The oil remains the responsibility of the supplier until the consignee confirms receipt.

14.15 How to account for a loss in transit

Consignees

Allowable and chargeable deficiencies — you must account for the quantity of tied oil supplied to you including quantities supplied and accepted that are more than those ordered. You must clearly note in your records any:

• non-receipt
• short delivery
• delivery in excess of order
• any delivery when the quantity is disputed

Allowable deficiencies only — you must record any deficiencies within the limits at sections 14.16 to 14.19 in your delivery account with a written explanation for audit purposes.

You do not normally need to investigate these deficiencies as long as there is no reason to suspect illegal abstraction or diversion of the product, and it is clear that the discrepancy resulted wholly or partly from either:

• natural wastage
• temperature reduction
• inaccuracy of measurement

Chargeable deficiencies only — you must:

• tell the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk immediately of any discrepancy which falls to be treated as an excess deficiency — that is, not due to natural wastage, temperature variation or tolerance in accounting (see sections 14.16 to 14.9) (a copy of the endorsed delivery note must be attached to the notification)
• advise the consignor using a copy of the delivery note endorsed and signed by you
• investigate the cause of the discrepancy, make a note of the result of the investigation in your records, and tell HMRC

Consignees and consignors

Chargeable (excess) deficiencies — the consignee and consignor must establish how the excess deficiency occurred. If you find that both the:

• discrepancy was the result of an error by the consignor
• delivery account is inaccurate and the amount of the deficiency was not ‘duly delivered’

We may tell you to adjust your delivery account and include a written explanation in your records. Otherwise the deficiency is considered to have occurred in transit, and duty must be paid as advised by the Mineral Oil Reliefs Centre.

Consignors

Chargeable (excess) deficiencies — you must investigate the cause of any excess deficiency the consignee tells you about, and record the result of the investigation in your records. The loss should be accounted for on line 12 of the HO34 return form.

14.16 How to account for natural wastage

The maximum allowances for natural wastage including evaporation and handling losses are:

Means of transport	Allowance
Pipeline	1% of the quantity dispatched for each storage tank dipped
(a) Where a measurement is based on storage tank dip on dispatch and/or on receipt	Nil
(b) Other pipeline movements	Nil
Closed drums	Nil
Ship or craft	0.5% of quantity despatched

14.17 When to make an allowance for temperature

A temperature allowance is to be made only when both the:

• quantity of oil is stated in bulk litres (or a similar bulk quantity) at despatch or receipt
• temperature of the oil is taken at despatch and receipt

14.18 How to make an allowance for temperature

The best way to allow for temperature is to by convert all quantities of oil to litres at 15°C.

If the deficiency in litres at 15°C is less than the deficiency in bulk litres the allowance is equal to the difference. If the deficiency in litres at 15°C is greater no allowance is to be made.

In other cases, the following allowances expressed as percentages of the bulk quantity despatched are appropriate:

• light oil: 0.11% per degrees celsius fall in temperature
• heavy oil: 0.08% per degrees celsius fall in temperature

Do not make adjustments on the basis of indirect evidence, such as ambient temperature.

14.19 How to work out an accounting tolerance

The allowance for accounting tolerances is the total of the separate tolerances on the accounts involved in working out the total deficiency.

For each:

• despatch and receipt account taken in storage tanks by dipping or automatic tank gauge, the tolerance is the quantity represented by a dip of 2mm
• account taken in a tank wagon or craft by reference to a calibration table, the tolerance is the quantity represented by the unit of calibration for the individual tanks to which it is dipped
• account taken by weighing the unit to which it is weighed if the oil is weighed net or the container is grossed and tared

There is no statutory right to these allowances.

15. Class Approval Scheme

15.1 What this scheme is

The Class Approval Scheme allows users and distributors of tied oil to trade without our formal approval (Individual Approval) as long as they:

• deal only in oil in closed containers of 210 litres or less
• put the oil to an eligible use

15.2 Who the scheme is for

Distributors who receive and supply tied oil in closed containers of 210 litres or less and users who receive tied oil in closed containers of 210 litres or less.

It is not for distributors who buy oil in bulk and decant into containers of 210 litres or less.

15.3 What qualifies as eligible use

Read section 17 to find out what qualifies as eligible use.

15.4 Scheme approval

Individual approval is not necessary if your uses qualify as eligible.

However, if you supply tied oil in closed containers of more than 210 litres, or in bulk you must get approval from the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk first.

15.5 How much tied oil you can supply or receive under this scheme

You can receive or supply any quantity of tied oil under this scheme, as long as it is in closed containers of 210 litres or less.

15.6 The conditions of the scheme

You must:

• not deliver tied oil for ineligible use
• use tied oils for ineligible purposes
• either receive or deliver tied oil in containers of 210 litres or less
• keep acceptable records and accounts which will give an audit trail
• sell the oil in a manner that makes it clear that it is not to be used for ineligible purposes
• use the following statement on your invoice or delivery note — ‘THIS OIL HAS NOT BORNE EXCISE DUTY AND MAY NOT BE USED AS HEATING FUEL, MOTOR FUEL OR ADDITIVE OR EXTENDER TO MOTOR FUEL.’

15.7 Importing tied oil under the Class Approval Scheme

You must be individually approved to import tied oils, and may also need approval as a tax warehouse. Read section 6 and section 8.

15.8 Exporting tied oil under the Class Approval Scheme

You must be individually approved to export tied oils, you may also need to be approved as a tax warehouse and may need a guarantee. Read section 6 and section 9.

15.9 How to get oils under this scheme

When you place an order with your supplier, you must make it clear the size of container that you want to receive the oil in.

Your order can be for any amount of oil you want, but the individual container size must not be more than 210 litres.

15.10 How to I supply oils under the scheme

You must supply tied oils in containers of 210 litres or less, and delivery documentation must include the statement at section 15.6 to confirm that excise duty is not due on it.

We do not expect retailers (for example, DIY shops) to issue delivery notes for sales of tied oil packaged for specified eligible ‘domestic’ use — for example, creosote for painting fences or white spirit for use in the home.

15.11 Accounting for oil delivered under this scheme

Oil delivered under this scheme is conditionally relieved of excise duty. Any person who receives or supplies the oil must produce records relating to that oil when requested by HMRC.

You must:

• provide a clear audit trail in your records and accounts
• record the names and addresses of your customers (if you are a distributor)
• record any losses of tied oil — see section 14
• record the disposal of any oil recovered from process — see section 11

15.12 When to pay duty under this scheme

You will have to pay duty if:

• you use tied oils for an ineligible purpose — you must pay duty appropriate at the time of use
• you deliver tied oils and have reason to believe the oil is to be used for ineligible purposes
• you dispose of waste oil (including used transformer oil and electrical insulating oil) outside the Tied Oils Scheme (see section 11.2)
• a deficiency cannot be accounted for due to natural wastage, temperature variation or tolerance in accounting (for example, dipping tolerance) this is classed as an ‘excess deficiency’ and you must account for and pay the duty on the deficiency at the appropriate duty rate (see section 14.4 and section 14.5)

You should send a written explanation of the reason for the liability to the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk and include full payment with form W50 that you can get from:

• Excise:Fuel Duty: enquiries
• the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk

15.13 Cancelling Class Approval

Class Approval can be cancelled if you have failed to meet the requirements of the Class Approval Scheme.

We will advise you in writing that we intend to cancel your right to operate the scheme. You cannot receive or distribute tied oils on or after the date of cancellation.

16. The Repayment User Scheme

Read section 2 before reading this section.

16.1 What the Repayment User Scheme is

It is an alternative to the Individually Approved User Scheme described in section 5 and the Class Approved User Scheme described in section 15. Individually or class approved users may receive oil conditionally relieved of duty.

This scheme allows an approved repayment user to buy oil from suppliers at a duty-inclusive price and reclaim that duty from Customs after putting the oil to eligible use.

16.2 Who the scheme is for

You can apply for approval as a repayment user if:

• you use (or intend to use) duty-paid oil other than as heating fuel, motor fuel, or additive or extender to motor fuel
• there is a realistic prospect of your use of oil earning duty relief of at least £250 over the maximum claim period of 3 years

You cannot be both an Individually Approved User or a Class Approved User and a repayment user for the same category of oil, except in the initial stages of transfer from repayment user to user — see section 6.13 about duty paid oil in stock.

16.3 Making a claim

You must be approved before you can make a claim. The law only allows repayment of duty to approved persons.

Read section 6 to find out how to get approval.

16.4 What to do if there’s a change to the details specified on your approval certificate

You must tell the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk immediately of any substantial changes to the details.

Read section 6.8 for more information.

16.5 What happens if you do not meet the requirements of the scheme

HMRC will review the form HO27 you used to make an application.

If you do not follow the requirements of the scheme or any special conditions that are introduced we may refuse to repay duty, cancel your approval, or both.

If you make a false or incorrect repayment claim you may receive severe penalties.

16.6 How to make a claim

You can make a claim on form HO29.

Complete the form and return it to the Mineral Oils Reliefs Centre with the other information we need. Read section 16.12 for more information.

16.7 Conditions that apply to making a claim for repayment

Oil is considered to have been used and entitled to repayment at the time of being taken into use.

Your claim must:

• be for oil on which duty has been paid and not previously repaid
• not include oil on which a claim for drawback of excise duty, or other claim for repayment of excise duty, has been or will be made
• not include any duty paid oil which you offer for sale
• be for at least £250 duty

The claim must cover a period of at least 2 months but not more than 3 years.

You may defer a claim for up to 3 years from the date of being taken into use until it amounts to £250 or more. You must then submit the claim within 3 months after the end of the claim period it covers

16.8 Claiming a repayment of VAT and Customs Duty

Repayment under this scheme is limited to the excise duty on mineral oils and you should make sure that no other duties or taxes, for example VAT, or UK and EU Customs Duty, are included in your claim.

If you are VAT registered, you may be entitled to claim Input Tax on your VAT return. ContactYou Excise:can enquiriescontact HMRC to find out more.

16.9 Using commercial accounting and stocktaking periods to make claims

Read section 13.1 to find out how to use commercial accounting and stocktaking periods to make claims.

16.10 Rate of duty paid that you must show on your claim

You must show the rate of mineral oil excise duty actually paid, exclusive of any special surcharge or special rebate that may be in force.

We will make any adjustment necessary for special surcharge or special rebate before we pay the claim.

16.11 What will happen if there’s a change in the duty rate in the Budget

Where a change in the duty rate occurs during the period of the claim, you must show separate details on your claim for oil or blend duty-paid at pre and post-Budget rates.

16.12 Evidence of duty payment

You must send receipted bills or invoices from your oil supplier with your form HO29, they must show:

• the date you bought the oil
• the name of the person who sold you the oil
• how much oil you bought
• the type of the oil — for example, gas oil or fuel oil

The documents should normally show the seller’s receipt. Another form of receipt can be used if it includes all that are shown on the HO29 form.

For certain mixtures of oil and other substances (for example, solvents which are not wholly oil) or blends of oils that have borne differing rates of duty, suppliers may mark invoices to indicate the net duty that has been paid, for example they could say:

• ‘Effective excise duty — per litre’
• ‘95% hydrocarbon oils at an excise duty of — per litre’

We will accept these net rates for repayment purposes, depending on selective official audits.

Consignments are frequently accompanied by an ‘Invoice/Delivery Note’ giving particulars of quantity and price, which can be followed later by a normal commercial invoice.

We may accept a consignment document when there is no supplier’s invoice, as long as it contains all the normal invoice details.

16.13 Who must sign the claim

The approved person must sign the claim, usually either:

• the proprietor or partner
• a director or the company secretary for a limited company

16.14 Submitting supplementary claims

Where your claim for a period has been paid, we may accept a supplementary claim (even for an amount less than £250) for the original claim period.

The supplementary claim must be clearly marked. It should be made within the time limits appropriate to the original claim.

16.15 What will happen if there’s a negative balance on line 9 of Form HO29

If the total excise duty overclaimed is:

• less than £250 you must deduct the quantity recovered from your next claim to repayment, showing the amount in the adjustment line of the HO29
• £250 or more you must make an immediate refund of the duty overclaimed to HMRC

16.16 How to measure the oil you use

As long as we are satisfied with the arrangements you have for control of the oil and none is delivered for ineligible use, the quantity of oil used in an accounting period may be taken simply as the decrease in the quantity in stock.

Exceptionally, where a repayment user is unable to measure stocks on hand but actually measures the quantities taken into eligible use, we may accept claims based on measured use as long as our officer is satisfied that the measurement of use is accurate.

Find out about more about measurement of oil for accounting purposes in section 13.2.

Claims for repayment of duty on quantities of more than 80,000 litres must be submitted in standard litres. All other claims can be submitted in standard or bulk litres — whichever is consistent with your records.

You cannot submit more than one claim in bulk litres to avoid converting to standard litres.

16.17 Decreases and increases in quantities of oil stored

Decreases

Small, natural and incidental wastage in the storage and handling of oil in connection with eligible use can be included in the quantity claimed. We may discuss this with you when you apply for approval or at any time later.

If you remove oil for ineligible use or deliver it to other persons for ineligible use, you cannot claim repayment on any part of the decrease or wastage that relates to ineligible use.

Increases

Any physical increase in the quantity of oil compared with the calculated quantity of stock should be treated as either:

• oil that you have not paid duty on
• oil that you have already claimed a repayment on

If the excise duty involved is:

• less than £250 you should deduct this amount from your next claim
• £250 or more you must make an immediate refund of the duty overclaimed to HMRC

16.18 Mixing oil

You can mix any descriptions of oil for the purpose of eligible use.

As an approved repayment user whose process of preparation or manufacture normally requires the use of a mixture of oils, you may receive oils separately and mix them in storage.

The mixture must be regarded as stock and not as oil taken into process.

16.19 Accounting procedure if you receive a mixture containing tied oil

If you are both a repayment user and an approved user or class approved user, you may store together a mixture of duty paid and tied oil. However limitations may apply, read section 16.2 for more information.

You must:

• keep acceptable records showing the different constituents of oil
• only make a claim for the duty paid oil

16.20 Receiving oils with different rates of duty into the same storage tank

You should work out use on the basis of:

• the proportions of the mixture at each rate of duty, the duty rate for the mixture being recalculated after each addition of fresh oil
• treating the components as layers drawn off successively, in order of receipt into storage, providing the mixture consists entirely of heavy oil or entirely of light oil

16.21 What recovered oil is

Recovered oil is oil which has been taken into eligible use but is later removed from your processing plant or is delivered for ineligible use.

16.22 How to account for recovered oil

You must deal with any duty claimed on oil that is later deemed to be ‘recovered’ as described in section 16.31.

16.23 When you do not need to deduct recovered oil from your next claim

You do not need to deduct recovered oil from your next claim if:

• you re-use the oil for another eligible purpose within your approved premises
• you send the oil for cleaning and, as long as that the oil remains in your ownership and is returned to your processing plant, no deduction is to be made
• the oil is unfit for re-use and is delivered for destruction and you get a certificate of destruction
• the oil is delivered to a mineral oil producers premises or another duty suspended installation, you must clearly state a duty repayment claim has applied to the oil

16.24 What to do if you want to burn recovered oil as furnace fuel

If you have reclaimed the duty on oil that is now deemed as ‘recovered’ and you now intend to burn it as a furnace fuel, before burning you must:

• apply for a concession from the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk (for unused virgin light oil see Rebate of duty on light oil used as furnace fuel (Excise Notice 184B))
• pay the of duty at the rebated furnace fuel rate on form W50 that you can get from Excise:Fuel Duty: enquiries or the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk

16.25 Storage requirements for recovered oil returned to stock

Where you intend to re-use recovered oil for eligible purposes you can return recovered oil mixtures to a storage tank containing any constituent oil.

If you do not intend to re-use recovered oil for eligible purposes you should return recovered oil to a tank containing oil of the same or higher duty rating than the oil from which the recovered oil derived.

16.26 Showing recovered oil in the balanced account on form HO29

The balanced account cannot show recovered oil separately. You should include recovered oil that is not returned to process in:

• item 5 (as delivered to other persons)
• item 6 (as put to ineligible use)
• the relevant box at the bottom of the form, shown as an adjustment — give a separate written explanation for the adjustment

This results in an automatic deduction from the quantity upon which repayment is claimed.

16.27 Showing recovered oil delivered to entered mineral oil producers’ premises on form HO29

You should not include the oil at item 5, as it is not deductible from the quantity for repayment. See note 1 on form HO29, and section 16.23.

16.28 Showing recovered oil delivered to other persons on form HO29

You should show the quantity of the oil at item 5, worked out in accordance with the directions in section 16.26.

The net deduction from your claim must not be less than the quantity certified on any certificate of duty payment given to the consignees.

16.29 How to work out the quantity for deduction

A deduction for the recovered oil should be based on the oil content remaining in the recovered mixture.

You should either have the oil analysed or make a reasonable estimate of the oil content remaining in the mixture.

16.30 How to work out the duty rate for deductions

Recovered oil must be treated as the duty category of oil from where it came from.

If the oil mixture recovered has been sourced from oil bearing different rates of duty, your deduction should be based on either an analysis of the mixture or a reasonable estimate of the oil constituents within the recovered mixture.

16.31 How to repay a deduction for recovered oil

Where your recovered oil is disposed of other than in accordance with section 16.23 (for example, if the recovered oil is returned to storage, used for any ineligible purpose, delivered to any other person), if the excise duty overclaimed amounts to:

• less than £250 you must deduct the quantity recovered from your next claim to repayment for similar oil
• £250 or more you must make an immediate refund of the duty overclaimed to HMRC

17. Definitions

Approved distributor

A person who has been individually authorised and approved for the purpose of supplying tied oil, in the course of trade, for eligible use. This will include anyone who stores oil in duty suspended installations and delivers it as tied oil.

Approved user

A person who has been individually authorised and approved for the purpose of putting tied oil to eligible use.

Dry broker

A distributor who does not take physical possession of the oil.

Entered mineral oil producers’ premises

Premises entered for the purpose of producing or refining mineral oil — read Motor and heating fuels general information and accounting for excise duty and VAT (Excise Notice 179) for more information.

Eligible use

The use of oil other than as fuel for any engine, motor or other machinery (including extender or additive to motor fuel) or heating fuel.

Heavy oil

Mineral (hydrocarbon) oil other than light oil.

Hydrocarbon oil

Petroleum oil, coal tar, and oil produced from coal, shale, peat, or any other bituminous substance, and all liquid hydrocarbons, but does not include hydrocarbons or bituminous or asphaltic substances that are either:

• solid or semi solid at a temperature of 1°C
• gaseous at a temperature of 15°C and under a pressure of 1013.25 millibars

Ineligible use

Use of oil as fuel for any engine, motor or other machinery (including extender or additive to motor fuel) or heating fuel.

Light oil

Mineral (hydrocarbon) oil which either:

• is not less than 90% by volume distils at a temperature not exceeding 210°C
• gives off a flammable vapour at a temperature of less than 23°C when tested in the manner prescribed by the Acts relating to petroleum

Person

An individual legal entity which includes:

• sole proprietors
• partnerships
• limited companies.

Repayment user

A person who has been individually authorised and approved for the purpose of reclaiming excise duty on duty paid oil put to eligible use under the terms of section 16.

Tied oil

Hydrocarbon (mineral) oils which are any light oils or heavy oils that fall into the excise definition of gas oil, fuel oil or kerosene, which are delivered conditionally relieved of excise duty, so they can be put to an eligible use.

Throughput Distributors

The amount of tied oil you distribute (based on deliveries) in a given period. Your total throughput will be the total of tied oil you distribute and use in a given period.

Use

For the purposes of this relief use must involve a process that, if it:

• does not actually consume the oil to the extent that there is little or nothing left
• demonstrably affects the performance of the resultant product
• contributes to its suitability for eligible use

Users

The amount of tied oil you use within a given period.

18. Categories of oils for the purpose of approval

18.1 Types of oils

There are 8 categories of oils for the purpose of approval for the Tied Oils Scheme in list A, B or C.

18.2 List A — light oils

Special boiling point oils

These include gasoline fractions that are distilled to specially selected boiling ranges and different volatilities according to the particular industrial use.

They are commonly given trade names beginning ‘SBP’, followed by a number — for example, SBP5.

White spirits

Also known as Stoddard solvent, this is a paraffin-derived clear, transparent liquid which is a common organic solvent used in painting and decorating.

Turpentine substitute is a synonym for White Spirit. Turpentine itself is produced from pine oil and is not covered by these regulations.

Aromatics

These are produced from gasoline to a high degree of purity and include:

• xylene
• benzene
• toluene
• cumene
• tetralin
• solvent naphtha (with the exception of benzene, these oils are extensively used in paint manufacture)
• ethyl benzene (normally produced by alkylating benzene with ethylene and used in the production of styrene)

Other light oils

Light oils not covered by the other categories in section 18.2 will need to be specified by name — for example, benzole.

Light oil used as furnace fuel in a vaporised or atomised form is not eligible for the Tied Oils Scheme but may be obtained at a reduced rate — see section 2.5 and Rebate of duty on light oil used as furnace fuel (Excise Notice 184B).

18.3 List B — heavy oils

The definitions used in this list are taken from Regulation 2 of the Hydrocarbon Oil Regulations 1973.

Gas oil

Heavy oil of which not more than 50% by volume distils at a temperature not exceeding 240°C and of which more than 50% by volume distils at a temperature not exceeding 340°C.

This category includes lubricating oils and white oils which meet this definition, electrical insulating oils (including transformer oil which is usually a gas oil) and switchgear oil which is used to quench the arc between the contacts in a switch.

Kerosene

Heavy oil of which more than 50% by volume distils at a temperature not exceeding 240°C, including lubricating oils and white oils that meet this definition.

Fuel oil

Heavy oil which contains in solution an amount of asphaltenes of not less than 0.5%, or which contains less than 0.5% but not less than 0.1% of asphaltenes and has a closed flash point not exceeding 150°C.

This category also includes lubricating oils and white oils, which meet the fuel oil definition, and fluxing oils (oils of low volatility used for blending with bitumen or asphalt to improve their fluidity which consist mainly of residual fuel oils).

Heavy oils that do not meet these definitions can be delivered at nil rate of duty for any use other than motor or heating fuel and are outside the scope of this scheme. If you are in any doubt, check with your supplier or the Mineral Oil Reliefs Centre at morcapprovalsteam@hmrc.gov.uk on the duty status of the oil.

18.4 List C — category E (excepted oils)

1. Spirits of turpentine (including sulphate, gum and wood turpentines). Crude dipentene and crude sulphate turpentine.

2. Refined oils (including terpinolene), of natural or synthetic origin which contain 50% or more of the following hydrocarbons:

• terpenes (including alpha-pinene, beta-pinene, bornylene, cadinene, camphene, carene, carvene, cedrene, citrene, fenchene, limonene, longifolene, myrcene, phellandrene, propenyl-norbornene, sylvestrene, vetivene and zingiberene)
• cymene and its isomers (including paracymene)
• isoprene

3. Styrene, alpha-methyl-styrene, alpha-methyl-styrene-dimer, vinyl toluene, di-vinyl benzene and ethylvinylbenzene.

4. Indene, decahydronaphthalene, tetrahydronaphthalene, monocyclopentadiene, dicyclopentadiene, di-isobutylene, tri-isobutylene, tetra-isobutylene, poly-isobutylene, cylo-octadiene, cyclo-dodecatriene, 4- methylpent-1-ene.

5. Rosin oils, mixtures of hydrocarbons and organic acids — used mainly in making cutting oils and paints.

6. Alpha olefins, the following:

• C6 linear alpha olefin (1-hexene)
• C8 linear alpha olefin (1-octene)
• C10 linear alpha olefin (1-decene)
• C12 linear alpha olefin (1-do-decene)
• C14 linear alpha olefin (1-tetradecene)
• C16 linear alpha olefin (1-hexadecene)

7. Benzole, absorbing oil and wash oils. Creosotes (including anthracene oil and mineral oil derived creosote substitutes), and black varnishes (including cut-back bitumens) of types suitable for use as:

• paints
• surface coatings
• preservatives
• finishes
• medicaments
• insecticides
• disinfectants

8. Oils of the liquid paraffin type that are not gas oils or kerosene suitable for use as medicines, or for use in contact with food for human consumption.

Product	CN codes at September 2009
White spirit	271011 21
Other special spirits	271011 25
Other medium oil	271019 29

‘Bulk commercial movements’ are defined by the Commission as applying to unpackaged product carried in a road tanker, rail wagon or similar — it does not apply to unpackaged containers of less than 210 litres, regardless of the number of containers in a consignment.

19. Movement of oil products under duty suspension between Northern Ireland and EU countries

Read section 8.5 and section 9.12 to find out where to include imports on the HO34 return form and the export documentation you must complete.

19.1 List of products and requirement for movement procedures

Council Directive 2003/96/EC Article 2.1 defines energy products by referring to their respective Combined Nomenclature (CN) codes in the Trade Tariff.

Article 20 defines those energy products which are covered by the control and movement provisions of Council Directive 92/12/EEC.

Movements of the following oil products between Northern Ireland and an EU country are covered by the control and provisions, and must follow the procedures shown in Receive goods into and remove goods from an excise warehouse (Excise Notice 197).

CN codes can change — check with the Trade Tariff.

Accompanying Administrative Document required for movements between UK and EU countries

Product	CN codes at September 2009
Benzole	270710 90
Toluole	270720 90
Xylole	270730 90
Other aromatic hydrocarbon mixtures	270750 90
Light oils	271011 11 271011 15
White spirit	271011 21
Other special spirits	271011 25
Aviation spirit	271011 31
Unleaded petrol	271011 41 to 271011 49
Leaded petrol	271011 51 271011 59
Spirit type jet fuel	271011 70
Other light oils	271011 90
Medium oils	271019 11 to 271019 15
Jet fuel	271019 21
Kerosene	271019 25
Other kerosene	271019 29
Gas oil	271019 31 to 271019 49
Fuel oil	271019 51 to 271019 69
Liquefied petroleum gas	271112 11 271112 19 271112 91 271112 93 271112 94 271112 97 271113 10 271113 30 271113 91 27113 97 271114 00 271119 00
Acyclic hydrocarbons	290110 00
Benzene	290220 00
Toluene	290230 00
Xylenes	290241 00 290242 00 290243 00
Mixed xylene isomers	290244 00

19.2 Exemptions to the movement procedures

The control and movement provisions of Council Directive 92/12/EEC only apply to bulk commercial movements for the products within the following 3 CN codes.

Accompanying Administrative Document not required for movements between Northern Ireland and EU countries of drummed product

Product	CN codes at September 2009
White spirit	271011 21
Other special spirits	271011 25
Other medium oil	271019 29

‘Bulk commercial movements’ are defined by the Commission as applying to unpackaged product carried in a road tanker, rail wagon or similar — it does not apply to unpackaged containers of less than 210 litres, regardless of the number of containers in a consignment.

19.3 Simplified procedures

Under Council Directive 2003/96/EEC Article 20.3 the control and movement procedures are simplified for the following products moving between Northern Ireland and Austria, Belgium, Germany, Luxembourg and The Netherlands.

Product	CN codes at September 2009
Benzole	270710 90
Toluole	270720 90
Xylole	270730 90
Other aromatic hydrocarbon mixtures	270750 90
White spirit	271011 21
Other special spirits	271011 25
Acyclic hydrocarbons	290110 00
Benzene	290220 00
o-Xylene, m-Xylene and p-Xylene	290241 00 290242 00 290243 00

You must get HMRC approval and conditions to use these procedures. If you want to find out more contact the Mineral Oils Reliefs Centre at morcapprovalsteam@hmrc.gov.uk.

19.4 Other circumstances

The procedures described in Receive goods into and remove goods from an excise warehouse (Excise Notice 197) also apply to all movements between Northern Ireland and EU countries of:

• mineral oils other than those listed at section 19.1 if intended for use, offered for sale or used as heating fuel or motor fuel
• any other hydrocarbon except for coal, lignite, peat or other similar solid hydrocarbons or natural gas, intended for use, offered for sale, or used for heating purposes

It is the responsibility of the consignor, guided by our officer, to decide if there is a risk of a mineral oil or product being used as a road or heating fuel.

Get help and advice

ContactYou Excise:can enquiriescontact HMRC if you need general help or advice.

To speak to someone in Welsh to get general help or advice contact Ymholiadau TAW, Tollau ac Ecséis.

Other relevant notices

You may find the following notices useful:

• Motor and heating fuels general information and accounting for excise duty and VAT (Excise Notice 179)
• Repayment of excise duty on heavy oil used to grow horticultural produce (Excise Notice 183)
• Receive goods into and remove goods from an excise warehouse (Excise Notice 197)
• Excise Notice 203a: registered consignees — this applies in Northern Ireland only
• Excise Notice 206: revenue traders’ records

Your rights and obligations

Read Yourthe HMRC Charter to find out what you can expect from HMRC and what we expect from you.

Help us improve this notice

If you have any feedback about this notice, write to:

You can also email: oils.policy@hmrc.gov.uk.

You’ll need to include the full title of this notice. Do not include any personal or financial information like your VAT or company reference number. This email address is not for general enquiries.

If you need general help with this notice or have other questions, contact:

• the HMRC excise helpline by phone on 0300 200 3700
• the Mineral Oil Reliefs Centre by email exciseenquiries@hmrc.gov.uk

Putting things right

If you are unhappy with HMRC’s service, contact the person or office you’ve been dealing with and they’ll try to put things right.

If you’re still unhappy, find out how to complain to HMRC.

How HMRC uses your information

Find out how HMRC uses the information we hold about you.