Background for Diesel Declarations
When boaters fill their boat with diesel they have to make a declaration about how much of the fuel will be used for propelling a private pleasure craft. This is because fuel used to propel a private pleasure craft is taxed at a higher rate than fuel used for domestic purposes like heating and lighting.
What percentage to declare for propulsion (rather than domestic use) is the subject of much debate, unfortunately not always based on what the legal requirements are.
Where can I find accurate information?
You can read the original HMRC Documents, particularly section 4.
If in doubt you should always refer to the HMRC documents, or the HMRC helpline which always take precedence over these notes. If your mate down the pub or another blogger says something different then think very carefully before you follow their advice or example.
The rest of this page explains my understanding of the position.
What does the declaration say?
The declaration the boater must sign when purchasing fuel says:-
“I declare that [ ]% of the fuel purchased will be used for propelling a private pleasure craft.
I am aware that the Hydrocarbon Oil Duties Act 1979, which permits the use of marked diesel to propel private pleasure craft, only applies within UK waters. I acknowledge that nothing in that Act, or the making of this declaration, affects any restrictions or prohibitions that may apply to the use of fuel for propelling private pleasure craft outside UK waters, including any restrictions or prohibitions under the law of another member state that apply within the waters of that member state.”
You must sign and date the declaration and also provide your name and address to the supplier.
Note this is a declaration about what the fuel just being put into the tank “will be used for” – and NOT what you used the last lot of fuel for.
What records do I need to keep?
There is no legal requirement to keep any records.
Some people keep records of past usage, but there is no need to. If you do keep records of past usage they may help you estimate your future usage when you make a declaration, but that’s unlikely to be exactly the same as you have just used.
How do I know what percentage to declare?
All that is required is an estimate of the percentage you will use for propulsion. It must be reasonable at the time you make it, but it doesn’t matter if circumstances change afterwards.
HMRC and several boaters’ organisations suggest that an average boater would use 60% for propulsion. The context suggests this is an average over the course of a year. Unless you think you are different from an average boater then you might just declare 60%.
Does the percentage vary during the year?
You can declare a different percentage each time you fill up with fuel. You would be very likely to declare different percentages during the summer and winter.
Most people cruise further in the summer than the winter and there is less need for heating and lighting during the summer. Overall you are likely to use more fuel for propulsion and less for domestic purposes during the summer than during the winter.
That means that their fuel declarations during the summer will show higher percentage of propulsion than in the winter. Spring and Autumn are likely to be somewhere in between. A boater declaring the same percentage in summer and winter may not be making a reasonable estimate.
On Canal & River Trust waterways, unless at an approved permanent mooring, the requirement to cruise at least every 14 days, even during the winter means that, unless purchasing a very small quantity of fuel, there will always be some propulsion element. If, for example, you are purchasing more than half a tank full there is likely to be a significant propulsion element.
The notional average boater uses 60% for propulsion over the year – that might be declared as 70% during the summer and 50% during the winter.
Can I use my cruising log calculate the percentage?
Your log will record past usage. Remember that the declaration is for future usage so the log can only be a guide.
If you do keep a log, perhaps recording information such as the hours the engine is run, the hours you are moving, the hours the diesel central heating is running etc. then please remember that the hours do not equate to fuel usage.
The engine will use considerably more fuel when propelling the boat than when idling or just charging the batteries. It might be that one hour of cruising uses four times as much fuel as one hour charging the batteries and heating hot water. One hour of running the diesel central heating will not use the same as one hour of running the engine.
When cruising with the electric motor on our boat we see a direct readout of the current – the equivalent of power for a diesel engine. On a deep, wide, broad canal such as the BCN Main Lines near Birmingham we might only need 30A to cruise at 3 mph while on a shallow, twisting narrow canal we might need 90A to cruise at the same 3 mph. That’s a 3:1 difference and there will be the same requirement for a 3:1 difference in power output from a diesel engine with similar differences in fuel consumption.
If you simply apportion the fuel usage according to hours run for the engine, heating etc. you will get an answer which is wrong – and possibly very wrong.
Can I declare a figure which is very different to 60%?
You can declare any figure you like, as long as it is a reasonable estimate of your expected usage at the time you make it.
If you declare a figure that is very different to 60%, could you explain why if asked by HMRC?
What about reasons like these?
- I run my engine frequently to get hot water for a shower
- I run my engine frequently to charge my mobile phone, laptop etc.
- I run my engine frequently to charge the batteries to run the (satellite) TV in the evening
- I run my engine frequently to charge the batteries to power the microwave
- I run my engine frequently to power the washing machine
- I run my engine frequently to …..
The average boater does those things and they are already allowed for in the 60%. To declare less than 60% for propulsion you would need to convince HMRC that you really did a lot more of those than the average boater. And doing a lot more of one doesn’t count if you do less of another
Is there a minimum figure I can claim?
If you have a permanent mooring and you are only using the diesel for heating and lighting while moored then you can claim 0% for propulsion.
Continuous cruisers must move at least every 14 days and most cruise more often than that so there must be some propulsion element (unless you are filling up with so little diesel that you can use it all for domestic use in 13 days).
Suppose 1% of the 40% the average boater claims for domestic use is for heating the hot water for having showers. Suppose you have twice as many showers as the average boater. Your domestic usage would increase from 40% to 41% with a corresponding drop in the propulsion figure from 60% to 59%.
What if you did twice as much of everything for domestic use and claimed 80% for domestic use that would still leave 20% for propulsion. I know the maths doesn’t work out exactly like that but it’s a good guide.
I can’t imagine a boater who does twice as much of everything. That’s watching twice as much television, running the heating for twice as long, taking twice as many showers etc. Every boater is different and some will do more of some things than the average boater, but they will do less of something else.
Following these examples it seems unlikely any boater who is cruising (rather than permanently moored) could claim less than 20% for propulsion and that would be extremely unlikely. It would be very hard to justify if challenged by HMRC. Even claiming as low as 40% for propulsion and 60% for domestic usage still requires you to use 1½ times more for domestic usage that the average boater.
What if my plans change?
What happens if your plans change and you use a different percentage of the fuel to the percentage you declared? Nothing happens as long as your declaration was reasonable at the time you made it.
A change of plan after filling up if, for example, a family member is rushed into hospital, means you may use more or less fuel for propulsion that you declared. If you get iced in after filling up and use less fuel for propulsion than you declared that’s just hard luck.
There is no question of claiming a refund or paying more tax because you paid the right amount when you filled up. The right amount of tax is calculated on what you reasonably estimated at the time you filled up. You may have paid more or less tax than you would have done had you known about the unexpected change in circumstances.
There is no question of adjusting the next declaration to try to correct the previous one for your changed circumstances. That was correct at the time you made it and there is no right or requirement to change it. If you actually paid more duty than you would have done if you had known about the change that’s just hard luck. The other way round you’ve saved a little money.
What if I have two fuel tanks?
If you have separate tanks for propulsion and non‑propulsion that makes life easy. Just declare 0% for fuel going into the non-propulsion tank and 100% for fuel going into the propulsion tank. If your propulsion tank also has some percentage domestic use then declare less than 100%.
Make sure the fuel stays in the correct tanks and don’t “accidentally” move some from one tank to the other. If your overall percentage is a lot different from 60% the HMRC might ask questions.
I’ve heard stories of boaters putting 60 litres of fuel at 0% propulsion into a tank which only holds 50 litres. I hope they aren’t true.
What if I make an incorrect declaration?
There is a penalty for purposely making a declaration you know to be incorrect. The further you are away from 60% the harder it will be for you to prove your declaration is reasonable. If a continuous cruiser declares 50% in the winter then I think they are unlikely to be asked. If they declare 0% they are more likely to be asked to justify it is reasonable.
The HMRC document states “Provided you have made every effort to accurately estimate your intended usage we will not apply a civil penalty”. Note the requirement for an accurate estimate so simply apportioning hours of usage from your log without taking into account the different rates of fuel usage between heating, cruising and battery charging, for example, might be seen as deliberately inaccurate. If you are declaring a lot less than 60% on average then you will need to demonstrate a very large effort to make your declaration right.
What about diesel declarations for business use?
Fuel used for propelling a boat for business purposes is charged at the lower rate, the same as domestic use, so you might be tempted to declare the fuel for business use, but think carefully before you do that.
To declare fuel purchases for business use you would need a business licence. I can’t imagine how you could claim business use if you only held a pleasure licence.
To get a business licence you must complete the additional paperwork and meet the additional requirements for business use and have your licence application approved. Legitimate businesses should have no trouble with this. There is an additional fee for a business licence. You will need additional insurance to cover the boat for business use and the normal business insurance for public liability etc.
The person steering a boat for business use will usually need to hold an appropriate qualification and there will be a cost to obtain this qualification and regular re‑certification.
Then you will need to register with HMRC and prepare business accounts and pay the appropriate taxes on your business turnover, separate from any taxes on fuel supply.
The costs of setting up and running a legitimate business will far exceed any saving in fuel duty and, if you don’t do it properly, you may have problems when, for example, you discover after an accident that your insurance company will not pay up.
What about our electric motor?
We have an electric motor on our Waterway Routes narrowboat. It is powered from batteries charged from the diesel engine when we are out cruising (or the shore supply at our home base). The diesel used to charge the batteries with electricity which is eventually used for powering the electric motor to propel the boat is still charged at the propulsion rate, even though it is initially used for charging the batteries.
What if the fuel supplier will only accept a 60% declaration for propulsion?
Accepting variable declarations creates additional work for fuel suppliers and some make their life easier by only accepting declarations at 60%.
If your reasonable estimate is for 60% then that is fine. You fill up and sign the 60% declaration.
If the fuel supplier has prominent signs, visible before you fill up, or the staff clearly tell you before you fill up that they only accept 60% declarations and that is not the amount you reasonably estimate, then you should not fill up. If your estimated percentage is not 60% then you are breaking the law by signing a declaration that says it is 60%.
Remember that it is you that is signing the declaration and that it is you (not the fuel supplier) that will be breaking the law. You must purchase your fuel elsewhere. It seems unlikely you will be prosecuted for declaring too high a percentage, i.e. 60% instead of 50%, but you are wasting money by paying too much tax.
If there are no signs, or they are only visible after filling up such as in the office which you only visit to pay after filling up and the staff have not told you before filling up then you must insist on signing the correct declaration, however much that upsets the staff. You are the one who would break the law by signing an incorrect declaration and you must not allow the staff to persuade you to break the law.
If you are presented with a pre-printed declaration showing 60% then cross that out and write in the correct percentage and initial the change, then insist that the correct payment is worked out. If problems persist then I’m sure HMRC would wish to know about fuel suppliers trying to coerce boaters into breaking the law by making incorrect declarations.
What about others declaring very small percentages for propulsion?
At some fuel suppliers you can see the list of declarations made by previous boaters on a clipboard or log sheet that everyone uses. At some I have seen the percentages are mostly around the 60% mark and that is plausible.
At some I see many declarations which are well below 60% and sometimes several at 0%. That is possible, but it seems less likely that these were all legal. Perhaps boaters signing the log see others declaring small percentages and foolishly decide to join in so they can also pay less tax.
I expect the HMRC will make audits from time to time to investigate and, where appropriate, prosecute boaters (not fuel suppliers) for making unreasonable declarations. I don’t know when or how the HMRC make these audits but it’s possible they are visiting fuel suppliers now to check the records and could be taking most interest in the records where there were lots declared well below 60%. They might also look at those declaring close to 0% when most declared 60%.
If you declared 40% when the HMRC believed 60% was more reasonable and you couldn’t justify the difference, they might just choose to give you a warning, as that might be seen as just a poor estimate on your part. They would probably make you pay the difference in tax, plus interest.
If you declare close to 0% then I believe they would be more likely to prosecute as you couldn’t explain away that much difference as a poor estimate.
Remember, the 60% suggested as appropriate for an average boater includes typical allowances for battery charging, heating etc. The further your declaration is away from 60% the more interest the HMRC are likely to take and the harder it will be for you to justify the difference.
Saying you followed the example set by others will be not be any form of defence.
How do I show I am a trader to show entitlement for 0% declaration for propulsion
There is no need to prove to the supplier that you are a trader or business user. Section 3.2 of the HMRC documentation specifically says to suppliers they are:-
“… not responsible for ascertaining whether the fuel you sell to an individual is for the propulsion of a private pleasure craft, it’s the purchaser’s responsibility to do so and to make a declaration to that effect”.
If a supplier is suspicious of your motives for declaring 0% for propulsion then any regular trader will have lots of information in the way of letter heads, business cards, receipts etc. to show and a CRT Trading licence may be one means of showing that. Non-CRT waterways generally do not have trading licences and manage perfectly well.
Remember it is the purchaser who makes the declaration and it is the purchaser who is guilty if making a false declaration if one is made. If the supplier is suspicious of the transaction then their obligation is to report it to HMRC and not to enforce the law themselves by refusing to make a supply at a particular percentage.