Clause 14
Finance Bill
1:30 pm
Angela Eagle (Parliamentary Secretary, HM Treasury; Wallasey, Labour)
Sir Nicholas, I was trying to earwig on that conversation as well. It was rather intriguing.
The UK held derogations permitting the application of exempt or reduced rates of duty of fuels used for those purposes. Unfortunately, they expired on 31 December 2006, and our applications for renewal were turned down. Consequently, the new free-standing duty rate on avgas set independently from other duties will be the rate that applies when the free-standing rate is introduced on 1 November. The current rate for avgas, which is set at half the rate for leaded petrol, is 30.03p per litre. The date of introduction coincides with the implementation of schedule 6.
The hon. Gentleman asked whether it was the minimum level allowed under EU rules. I can confirm that it is. He also asked about exemptions, particularly for emergency flying vehicles and vintage aircraft. The new regime applies only to private flying, so air ambulances and so on are not covered. We are considering in more detail the position of training flights, which he mentioned. I cannot usefully add anything on that, but I am sorry to disappoint him that there are no exemptions for fuel used in vintage aircraft.
The hon. Gentleman asked how the new rates might interact with the planned introduction of the new aviation duty in November 2009. The interaction with the new aviation duty will be considered fully as the details of that new tax are finalised. That issue is under consideration by the Government. He asked about fuel use for domestic purposes, which does not have to be charged at the full duty rate. We are talking about the difference between the purpose of heating and the purpose of propulsion. An allowance will be made for fuel used for domestic purposes, which will continue to be supplied at the rebated rate, because there is a zero rate for heating. Her Majesty’s Revenue and Customs will discuss appropriate allowances with representatives of the boating industry.
The work done on designing and introducing the new rates has been accompanied throughout by consultation of all the industry bodies to ensure that we are as aware as possible of the details and the technical problems that may arise. I have the impression that there has been good co-operation between HMRC and the industry representatives during the consultation. We have tried to make the introduction of the rates as technically effective as possible, with the least number of unintended consequences, and I hope that we can show that we have done that.
On the possibility of the EU not being happy with the way in which we have ended the derogation and introduced the new rates, there is no reason for the Commission to challenge our new arrangements. The Commission always keeps a close eye on what member states are doing, so I cannot say that there will be no objections, but we are not expecting objections, as we have ended the derogation as it asked and put in place systems that enable us to comply with the appropriate directive.
The self-certification approach raised a few eyebrows, but HMRC’s enforcement effort has to be proportionate to the risk, and this is quite a small area for fuel sales. In the context of the total yield of £24 billion from oil, use in private pleasure craft would account for—get ready for this—0.06 per cent. of the total revenue. The chief risks arise both from pleasure craft owners misleading suppliers about the nature of their boat, whether it is commercial or domestic, and inflating their entitlement to fuel supplied for domestic purposes, and from those who supply the fuel failing to submit returns or pay the revenue that they collect.
For aircraft, the only risk is that flyers will fail to declare any duty on fuel use for private pleasure flying, but the revenue risk is considered negligible, as private pleasure flying use of avtur—aviation turbine fuel—is estimated to be a fraction of 1 per cent. of the avtur that is used in the industry. HMRC will not give a free hand, but it will approach the paying of duty according to a risk-based assessment. That does not mean that if there are obvious examples of deliberate evasion of the duty, action will not be taken, but I hope that it gives the hon. Gentleman an insight into our approach.
On the 20 per cent. reduction in use deployed in calculating the cost, which the hon. Gentleman also mentioned, it is difficult to project the impact, especially when taking into account the concession on fuel for domestic purposes, because we do not quite know how that will work out. It will mitigate the impact to some extent, but that is a best guess. Clearly, the way in which it develops will be taken into account in refining the assessments of cost in the future. I hope that, with those responses to the hon. Gentleman’s quite reasonable questions, the Committee will be happy to pass clause 14 and schedule 6.