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Finance Bill 2008

Volume 694: debated on Thursday 26 July 2007

My honourable friend the Exchequer Secretary to the Treasury (Angela Eagle) has made the following Written Statement.

The Finance Bill 2008 will contain provisions amending the definition of ultra-low sulphur diesel (ULSD) in the Hydrocarbon Oil Duties Act 1979, to take retrospective effect from 4 September 2007.

The Motor Fuel (Composition and Content) (Amendment) Regulations (SI 2007/1608) issued by the Department for Transport require oil suppliers to supply sulphur-free diesel (SFD) to garage forecourts from 4 December 2007. While the current duty rate on both ULSD and SFD is 48.35 pence per litre, mixtures of the two fuels meet neither definition, and are liable to the heavy oil duty rate (currently 54.68 ppl).

In the transitional period before and after the DfT regulations come into force, there may be occasions when ULSD and SFD need to be mixed, and the high rate of duty may act as a disincentive for the industry to supply SFD. The provisions will remove the density and distillation requirements from the ULSD definition, so that mixtures of ULSD and SFD will meet the ULSD definition. Bringing forward the deregulatory changes to the definition of ULSD will ensure the smooth changeover from ULSD to SFD.