Revenue fraud in road fuels in Great Britain is principally in the diesel sector. This involves rebated (reduced duty) off-road fuels like red diesel, kerosene and a range of oils known as ‘tied’ oils all of which carry little or no tax being intended for industrial uses. These fuels are sometimes illegally used as fuel for road vehicles.
What are the main types of oils fraud?
The key fraud types are:
- Laundering– treating red diesel and kerosene with chemicals to remove their markers and dyes and make identification of use as a road fuel harder
- Mixing- combining kerosene or ‘tied’ oils with lubrication oils to make an illegal road fuel or to dilute road diesel
- Misuse– illegally using red diesel in road vehicles when it is only intended to be used in off road vehicles.
- Smuggling– importing quantities of oil without payment of UK excise duty. Smuggling of oil (both red diesel and laundered fuel) from the Republic of Ireland (RoI), where duty rates on road fuel are lower, across the border to Northern Ireland is a significant problem. There is also some smuggling from the RoI to the UK mainland by ferry.
- Decanting– involves bringing fuel into the UK in the running tank of a commercial vehicle (which is legal) but then decanting it for use by other vehicles (which is not legal).
- Biofuel/vegetable oils– used to mask laundered fuel and produced and sold commercially without payment of excise duty.
Oils fraud, involving the misuse of duty privileged fuels supplied for non-road use, began in Northern Ireland. It quickly spread to mainland UK where criminal organisations were laundering rebated fuels with other fuels to sell to hauliers, evading both excise duty and VAT. Many of the fraudulent suppliers became in HMRC terminology ‘missing traders’ – disappearing without paying VAT.
How is Oils Duty Fraud Prosecuted?
As with other duty frauds, oils frauds are usually prosecuted as either the fraudulent evasion of duty under Customs & Excise Management Act 1979 section 170, or cheating the revenue under common law.
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