The news on Thursday 8 December that the EU Commission has rejected the UK’s application for the retention of the current derogation on red diesel is very disappointing. It will have an impact on the boating market and business implications for some companies in the industry.
The Seeing Red Campaign, run by the British Marine Federation (BMF), the RYA and the Inland Waterways Association (IWA) was successful in many respects. Through our efforts the UK Government recognised and accepted the problems that the loss of the derogation would bring and fought for the derogation to be retained. However, despite the considerable efforts of the campaign partners and the Government, we were unable to halt the EU’s march on tax harmonisation.
Bad news yes, but there is no need to panic
Although the derogation officially ends on 31 December 2006 nothing will happen for the moment. The Government has to work out what measures are necessary, how to enforce them and in what timeframe this will take place. The Treasury Minister, John Healey, made it clear to the responsible EU Commissioner that the UK will need a clear transitional period in which to implement the changes required particularly as legislation at the UK level will be required to implement the EU Directive. Members can be assured that the industry will press for the longest possible transitional arrangements so that the boating community has time to prepare
So what does this mean for the industry?
We are faced with the following difficult facts:
Once the UK Government implements the levy increase the industry will not be able to sell reduced duty red diesel to leisure boat users. Leisure users will have to use Ultra Low Sulphur Diesel (ULSD - the same diesel used on the High Street).
Commercially operated vessels will still be able to use red diesel.
Marine businesses will need to take commercial decisions on the markets they wish to supply. Companies supplying the leisure market will need to source supplies of ULSD and provide the infrastructure to dispense it. This could include the need to industrially clean the red dye out of existing tanks and pumping equipment or invest in new tanks and equipment.
So what happens next?
The first move is the Government’s. They need to consult with the industry following the Commission decision. We have already arranged meetings with HMRC officials and the Treasury Minister so we can start the consultation process and move forward in a pragmatic and informed manner. The BMF will involve members in the Government consultation and will be pressing for a lengthy transitional period in order for companies to be able to business plan and implement the necessary changes.
We urge members to work with us through this difficult process so that we can ensure that the industry can continue to prosper.