UK Biofuel Tax Concessions May Spur Growth


Written by John Hornig, who helped start a biodiesel outlet in the U.K, and currently works for Blooming Futures, a non-profit COOP that converts diesel cars so they can use plant oil for fuel.

The big news in the UK at the moment (at least for biofuel lovers) is that if you use less than 2500 liters (about 25,000 miles) of your own biodiesel or straight vegetable oil each year, you no longer have to pay taxes on it. If you make your own fuel – whether that involves a bit of backyard bucket chemistry in the case of biodiesel, or whether you buy straight vegetable oil at the supermarket and ‘produce fuel’ by tipping it into your converted diesel engine — then you previously had to pay a tax on it.

No longer. Though this isn’t due to some shining example of enlightened thinking by the UK taxman. Instead, the tax on the low-volume biofuel producer was dropped due to the high cost of enforcing it: getting each user to register with the tax officials, arrange a visit, pay the full fuel duty, submit a rebate form and finally claim some of the money back (UK biodiesel and straight veggie oil get a 20 pence/liter tax break).

As the number of biofuel micro-producers and users in the UK has increased, so has the administrative burden. And the small amount of revenues from these low volume users is not enough. So they’ve thrown in the towel.

This capitulation spells good news for small scale biofuel use in the UK. No one has any idea how the 2500 liter annual limit will actually be enforced – and none of the users will likely help them out with that one.

With UK biodiesel duty currently standing at 28.35p/liter for anything over 2501 liters each year, the Inland Revenue’s profit margin doesn’t look so good close to the cut off line. The small biodiesel producer making 2501 liters a year, at 28.35p a liter tax, pays an annual tax bill of £709.03. For this, the Inland Revenue need to arrange one site meeting, process 4 forms (one each quarter), and write 4 cheques. Basically it’s not worth their while.

The end of the tax will add encouragement for biodiesel producers and maybe even bring in a new crowd. Even more so it will be a boon for the straight vegetable oil market. The top of the range single-tank conversions on the most economical cars are just now becoming cost efficient for the first time. And Elsbett, the German market leaders in straight vegetable oil conversion technology, have just announced they’re moving to the UK. The end of the tax will add even more incentive to convert to vegetable oil.

So what we’re seeing may be a first – an over-complicated, poorly planned tax concession could actually stimulate some real growth.


Jim Beyer

Does this concession include renewable methane (the only biofuel that really makes any sense) ?

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