Guidance

Motor and heating fuels used to generate electricity — relief from Excise Duty (Excise Notice 175)

Find out about relief from Excise Duty for users of fuel used to generate electricity ('Electricity Relief').

1. Overview

1.1 Information in this notice

This notice gives details of the relief from excise duty available for users of hydrocarbon oil used to generate electricity (‘Electricity Relief’). It also explains the roles and responsibilities of qualified claimants.

1.2 Who should read this notice

This notice is for generators of oil based electricity in the UK, including combined heat and power (CHP) stations, auto-generators and exempt unlicensed electricity suppliers.

1.3 Legislation coverings this notice

Legislation
Primary Customs and Excise Management Act 1979

The Hydrocarbon Oil Duties Act 1979
The Hydrocarbon Oil Duties (Reliefs for Electricity Generation) Regulations 2005 (SI 2005/3320, as amended by SI 2007/2191, SI 2008/753, SI 2013/657, SI 2014/713, SI 2022/234) and SI 2015/943
Secondary Biofuels and Other Fuel Substitutes (payment of excise duties and so on) Regulations 2004 (SI 2004/2065, as amended by SI 2007/1640, SI 2007/3307, SI 2008/753 and SI 2022/234)

1.4 Health and Safety

You must follow the legal provisions relating to health and safety such as the Health and Safety at Work Act 1974. These provisions may include the need to display warning notices and to issue health and safety instructions to both staff and visitors.

If you issue special equipment or protective clothing to your staff when they are undertaking activities such as handling, inspecting or sampling fuel then you must provide similar clothing and equipment to us when we undertake the same activities.

2. Relief Scheme

2.1 Background

The Hydrocarbon Oil Duties (Reliefs for Electricity Generation) regulations 2005 allows for a relief from fuel duty on oils used in electricity generation. It was introduced on 1 January 2006 to make sure the tax treatment of oils used in electricity generation is broadly consistent with other energy products used for the same purpose.

In order to encourage investment in low carbon power generation, the government introduced a carbon price floor (CPF) from 1 April 2013. Supplies of coal and other solid fuels, natural gas and Liquefied Petroleum Gas (LPG) used in electricity generation are liable to newly created carbon price support (CPS) rates of Climate Change Levy (CCL) from that date. For oils used in electricity generation from the same date, the amount of fuel duty that can be reclaimed under the Electricity Relief will be adjusted, establishing effective ‘carbon price support rates’ for oils.

2.2 Claiming relief

Relief must be claimed by a qualified claimant. A qualified claimant is a person who causes qualifying oil to be used to produce electricity in a generating station or to produce the outputs of a CHP station.

2.3 Oils that qualify for relief

Oils used to generate electricity qualify for the relief if they:

  • were put into a generator:
    • before 1 April 2022 (rebated heavy oil)
    • on or after 1 April 2022 (full duty paid heavy oil, or rebated heavy oil used as allowed under a licence issued by HMRC and for which a payment of the rebate is made)
  • are light oil (which is rebated for use as furnace fuel)

Examples of rebated heavy oils include:

  • fuel oil
  • gas oil including hydrotreated vegetable oil (HVO)
  • kerosene
  • other heavy oils such as lubricants and recovered fuel oil

Examples of rebated light oils include naphtha or condensate.

If you are unsure if the oil used to produce electricity qualifies for relief, contact the helpline on telephone: 0300 200 3700.

Biofuels used to generate electricity are also subject to relief from fuel duty. This is provided for by part 7 of the Biofuels and Other Fuel Substitutes (payment of excise duties and so on) Regulations 2004. Read Excise Notice 179e for guidance on how to claim relief on biofuels used to generate electricity.

2.4 Form of relief

Relief is given in the form of a repayment of fuel duty to the qualified claimant.

2.5 Amount of duty that can be claimed

For generators in Great Britain (England, Scotland and Wales), the amount of relief which can be claimed is the amount of duty charged and paid on the qualifying oil used to produce electricity less an amount in respect of CPS rates of fuel duty.

For generators in Northern Ireland, the amount of relief which can be claimed is the amount of duty charged and paid on the qualifying oil used to produce electricity in a generating station.

Different rules apply to CHP stations, read section 3 of this Notice for further details.

2.6 CPS rates for fuel duty

For Great Britain, the following rates apply.

Fuel Rate from 1 April 2014 to 31 March 2015 (but for kerosene 1 May 2014 to 31 March 2015) (per litre) Rate from 1 April 2015 to 31 March 2016 (per litre) Rate from 1 April 2016 to 31 March 2022 (per litre)
Fuel oil, other heavy oil, rebated light oil (£ per litre) £0.03011 £0.05730 £0.05711
Gas oil, kerosene, rebated bioblend (£ per litre) £0.02642 £0.04990 £0.04916
Fuel Rate from 1 April 2022 (per litre)
Qualifying oil which is light oil (light oil for use as furnace fuel) £0.05711
Qualifying oil which is heavy oil other than gas oil or kerosene (on which no rebate is allowed under section 11(1) or 13ZA of the Hydrocarbon Oil Duties Act 1979, or in respect of which a payment is made under section 12(2) of the Hydrocarbon Oil Duties Act 1979) £0.05711
Qualifying oil which is gas oil or kerosene (on which no rebate is allowed under section 11(1)(b) or 13AA of the Hydrocarbon Oil Duties Act 1979) £0.04916
Qualifying bioblend £0.04916

For Northern Ireland, the CPS rates do not apply in respect of oils used in electricity generation, regardless of if the electricity is:

  • sent to the grid
  • consumed in Northern Ireland

2.7 When relief is allowed

Relief is allowed on quantities of qualifying oil used to generate electricity in a generating station, or the outputs of a fully or partly exempt CHP station.

This is subject to the limitations set out in section 3 of this Notice.

Relief is allowed only after the oil is used to produce the electricity. Therefore, relief is not allowed on unused oil held as stock.

2.7.1 Auto-generators and exempt unlicensed electricity suppliers

No relief is allowed on qualifying oil used to produce electricity by an auto-generator or by an exempt unlicensed electricity supplier.

An ‘auto-generator’ is a person who produces electricity primarily for his own use. Electricity will be treated as primarily for own use when it is not produced by:

  • an electricity utility or a person treated as such for the purposes of any supplies of electricity they make
  • a person who has consumed, in the preceding 3 months, less than 75% of the electricity produced in that period

An ‘exempt unlicensed electricity supplier’ is a person who is exempt from either:

  • section 4(1)(c) of the Electricity Act 1989 (persons supplying electricity to premises) (the exemption is granted by an order under section 5 of that Act)
  • article 8(1)(c) of the Electricity Supply (Northern Ireland) Order 1992 (the exemption is granted by an order under Article 9 of that Order)

This applies unless that person is acting otherwise than for purposes connected with the carrying on of activities authorised by the exemption.

However, relief is allowed when electricity produced by an auto-generator or an exempt unlicensed electricity supplier is supplied to a licensed electricity supplier (or a person treated as such under the CCL legislation). Read paragraph 2.5 for information on the amount of relief that can be claimed.

Auto-generators or exempt unlicensed electricity suppliers using combined heat and power stations should refer to section 3 of this notice.

2.8 How you claim relief

If you are a qualified claimant you should submit your claims, including for CHP stations, in writing. Form EX55 should be used for this purpose and is available from our website or from our helpline on telephone: 0300 200 3700.

You should also use form EX55 to account for the CPS rates of fuel duty. You should record the quantity of fuel used during the period of the claim and use the appropriate CPS rate for the fuel used to calculate the total carbon price support charge. This charge will then be deducted from the amount of fuel duty on which you are claiming relief.

You should send the claim and supporting documentation to the HMRC Mineral Oil Reliefs Centre, by email: morcrepaymentclaimsteam@hmrc.gov.uk.

2.9 When to claim

Claims must be for a period of at least one month, but not longer than 3 years and must be made no later than 3 months after the period to which it relates. Claims cannot be made for amounts less than £50.

Different rules apply to CHP stations, read section 3 of this notice for further details.

2.10 Evidence you need to submit with your claim

You will need to include supporting documentation with your claim to demonstrate that both of the following apply:

  • you used the oil to produce electricity
  • the duty has been paid and is not subject to any other:
    • application
    • claim for repayment
    • remission
    • drawback

Examples of the sort of evidence required include purchase orders, delivery notes or sales invoice, although other forms of evidence may also be accepted.

2.11 Claiming the relief on rebated fuel used before 1 April 2022

After 1 April 2022, if your claim for relief includes rebated fuel you used before this date, you must claim at the rebated rate. This includes when you’ve used rebated fuel that was already in your generator after 1 April 2022, before the rules changed.

If you’re making a claim that includes rebated and unrebated oil, you should submit the details separately on the same EX55 claim form after you’ve entered the first set of details. You do this by clicking the ‘Add’ button at the bottom of the page.

3. Combined heat and power stations (CHP stations)

3.1 Background

This section only applies to CHP stations that are assessed and certified under the CHP Quality Assurance (CHPQA) programme administered on behalf of the Department for Energy Security and Net Zero (DESNZ) and are in possession of an exemption certificate issued by DESNZ’s Secretary of State. A CHP station that is not within the CHPQA programme is normally treated, as regards electricity, as a form of electricity generation. CHP stations within this category may be able to claim relief on fuel duty only in the circumstances set out in paragraph 2.7.1.

Self-assessment and certification under CHPQA programme is based on a methodology designed to assess the quality of a CHP station and its qualification as a Good Quality CHP station. This then determines the extent to which it is eligible to receive fiscal and other benefits. For CCL, for example, it will determine the extent to which both the input fuel used in the CHP station and the corresponding outputs (direct and self-supplies of qualifying power output electricity) are relieved of CCL.

For full relief on input fuel, a station needs to achieve, or better, the efficiency percentage threshold of 20%. When this criterion is not met, relief from CCL is scaled back. This is calculated by applying the ‘relevant fraction’, the ratio between a station’s efficiency percentage and the threshold efficiency percentage, to supplies made to the station. A CHP station is able to claim relief on oils used to generate outputs in respect of an annual operation scaled back to the same relevant fraction as entitlement to relief from CCL.

CHP stations in Great Britain will also need to account for CPS rates of fuel duty on oil that is referable to the production of electricity. However, from 1 April 2015 they only need to account for the CPS rates on oil that is referable to electricity used on-site.

Electricity is used on-site if it is self-supplied or supplied to a consumer by an exempt unlicensed electricity supplier.

Electricity is self-supplied when the producer makes no supply of it to another person, but causes it to be consumed in the UK. This will include the parasitic load of the CHP station.

A CHP station can be an exempt unlicensed electricity supplier if it qualifies under Class A or Class C of Schedule 4 of The Electricity (Class Exemptions from the Requirement for a Licence) Order 2001.

3.2 Outputs from a CHP

Outputs from a CHP include:

  • heat
  • steam
  • mechanical power
  • electricity

3.3 Amount of relief that can be claimed

If you are a fully exempt CHP station, that is to say your efficiency percentage is equal to, or exceeds the threshold efficiency percentage, the amount of relief you can claim is the amount of duty charged and paid on the qualifying oil.

If you are a partially exempt CHP station, that is your efficiency percentage is less than the threshold efficiency percentage, the amount of relief you can claim is the amount of duty charged and paid on the qualifying oil used to produce your outputs scaled back to the relevant fraction.

However, the amount of relief that can be claimed is reduced, less an amount in respect of the CPS rates of fuel duty.

3.4 How to calculate your claim

You should first apply the relevant fraction to the quantity of qualifying oil or bioblend you have used during the annual operation to which the claim refers in order to calculate the amount of fuel duty relief you are claiming. Read section 3.5 of this notice.

You then need to calculate the carbon price charge for the annual operation. For the 2015 annual operation you will need to determine the quantity of qualifying oil or bioblend consumed between:

  • 1 January and 31 March to produce electricity, read section 3.6 of this notice
  • 1 April and 31 December to produce electricity used on-site, read section 3.6 of this notice

For subsequent annual operations you should apply the percentage of total fuels referable to the production of electricity used on-site during that annual operation to qualifying oil or bioblend oil consumed to produce outputs during that operation.

Once you have applied the CPS rates to these quantities and calculated the total carbon price charge, the resulting figure will then be deducted from the amount of fuel duty relief you are claiming.

3.5 What the relevant fraction is

The relevant fraction is the fraction when the numerator is the efficiency percentage for the station, and the denominator is the threshold efficiency percentage for the relevant annual operation.

The efficiency percentage is the station’s power efficiency, as stated on its CHPQA certificate.

For example, when in an annual operation, a station achieves an efficiency percentage of 15%, and the threshold efficiency percentage is 20 per cent, the relevant fraction is:

15 ÷ 20 = 75%.

3.6 How to determine the quantity of oil referable to the production of electricity

To establish the quantity of oil referable to the production of electricity you will need to refer to the CHPQA certificate for during the annual operation to which the claim refers:

Step Necessary action
1 Establish the quantity of input fuel used to generate electricity in the annual operation. This is calculated using one of the following equations:

For CHP stations that do not produce mechanical power
Q = TFI - (QHO ÷ 0.81)
TFI = Total Fuel Input taken from the certificate.
QHO = Qualifying Heat Output taken from the certificate.
81% is the reference boiler efficiency.

For CHP stations that do produce mechanical power
Q = (TFI – (QHO ÷ 0.81)) × (1 – (MO ÷TPO))
TPO = Total Power Output taken form the certificate.
MO is the Mechanical Output in megawatt-hours (electrical) generated by the station in a given annual operation to drive a mechanical load (such as a pump, fan or compressor) through direct coupling, without the use of electricity. You will have provided this within your CHPQA annual self assessment.
2 Calculate the percentage of the fuel input in the annual operation to generate electricity, by applying the equation:
(Q ÷ TFI) × 100
3 Apply this percentage to the quantity of qualifying oil and bioblend consumed to produce outputs prior 1 April 2015.

3.7 How to determine the percentage of oil referable to the production of electricity consumed on-site

You will again need to refer to the CHPQA certificate for during the annual operation to which the claim refers:

Step Necessary action
1 Establish the quantity of input fuel used to generate electricity in the annual operation. How to do this is explained in paragraph 3.5 at step 1.
2 Establish the amount (R) of fuel used in that annual operation to generate electricity that is not qualifying electricity. This is done by applying the equation:

R = Q × (1 – (ES ÷ (TPO – MO)))
TPO = Total Power Output taken from the certificate.
ES = the electricity used on-site in the annual operation covered by the certificate. You will need to be able to demonstrate this from your business records. For the purposes of the above equation this figure cannot be greater than the Qualifying Power Output shown on the certificate.
MO is explained in paragraph 3.5.
3 Calculate the percentage of fuel in the annual operation covered by the certificate used to generate electricity that is not qualifying electricity, by applying the equation:

(R ÷ TFI) × 100
4 Apply this percentage to the quantity of qualifying oil and bioblend consumed to produce outputs on or after 1 April 2015.

3.8 CHP stations situated in Northern Ireland

The CPS rates of fuel duty do not apply in respect of oils used in electricity generation in Northern Ireland, regardless of if the electricity is:

  • sent to the grid
  • consumed in Northern Ireland

3.9 Additional information CHP stations need to supply

CHP stations need to supply a copy of their CHPQA certificate and Secretary of State certificate with their claim. Failure to supply the certificates may delay the processing of claims.

3.10 When CHP stations should make a claim

Applications for relief must be in respect of an annual operation and must be made no later than nine months after the annual operation to which it relates.

Claims cannot be made for amounts less than £50, nor can they be made based on the previous year’s operation. This means that duty can only be claimed after the actual performance for the year is known and certified.

4. Dealing with HMRC

4.1 Visits by HMRC

We may wish to inspect any generating station or CHP station in which a qualified claimant has used oil to produce electricity. We will normally make an appointment to see you and we will try to make our visit with as little disruption to your business as possible.

When we make our appointment we will tell you:

  • who we want to see
  • what records we want to see
  • how long we think that the visit will take

4.2 Officers’ powers

Action Law
Inspect any generating station or CHP station in which qualifying oil is used to produce electricity The Hydrocarbon Oil Duties (Reliefs for Electricity Generation) Regulations 2005
Require the production of your business records and remove or take copies of those records CEMA 1979 s.118B. Read Revenue Traders (Accounts and Records) Regulations 1992 for more information

4.3 Penalties

If you make a false declaration or claim for relief you could be liable to a financial penalty.

4.4 If you disagree with a decision

If you disagree with a decision made by one of our officers you may be able to have a review or to appeal to an independent tribunal. If so, we will offer you a review in our decision letter and tell you about your right of appeal.

If you disagree with the decision, you may either accept the review offer or appeal to the independent tribunal. If you accept the review offer, but do not agree with the review conclusion you will still be able to appeal to the independent tribunal. More information on HMRC’s review and appeal procedures is available on our website.

5. Glossary

Term Description
Annual operation A period commencing on 1 January and ending on 31 December.
Auto-generator Generator of electricity primarily for own use when the owner of the generating plant has title to the input and output fuel. (Primarily = 75 per cent of the generated output).
CCL/levy Climate Change Levy. A levy on specific forms of energy supplied to industrial and commercial users.
CEMA 1979 The Customs and Excise Management Act 1979.
Combined heat and power (CHP) station A station producing electricity or motive power that is (or may be) operated for purposes including the supply to any premises of:

(a) heat produced in association with electricity or motive power
or
(b) steam produced from, or air or water heated by, such heat.
CHPQA The Combined Heat and Power Quality Assurance Standard Issue 3, January 2009 originally published by the Department for the Environment, Food and Rural Affairs (the ‘CHPQA Standard’) including the later of version Final 1.0, 2.0 or 3.0 of CHPQA Guidance Notes 0 to 4 (including 2(S), 3(S), 4(S), 10 to 28 and 30).
CHPQA certificate A certificate issued in respect of a CHP station following assessment of the station against criteria set out in the CHPQA.
CPF carbon price floor is designed to provide an incentive to invest in low carbon power generation by providing certainty to the carbon price in the UK electricity generation sector.
CPS rates carbon price support rates designed to reflect the amounts of carbon dioxide produced when the fuels are burned.
Electricity utility The holder of:

(a) a licence under section 6(1)(d) of the Electricity Act 1989 (supply licences)
or
(b) a licence under Article 10(1)(c) or (2) of the Electricity Supply (Northern Ireland) Order 1992.
Except when the holder is acting otherwise than for purposes connected with the carrying on of activities authorised by the licence.
Exempt unlicensed electricity supplier A person to whom an exemption from:

(a) section 4(1)(c) of the Electricity Act 1989 (persons supplying electricity to premises) is granted by an order under section 5 of that Act,
or
(b) Article 8(1)(c) of the Electricity Supply (Northern Ireland) Order 1992 is granted by an order under Article 9 of that Order.
Except when they are acting otherwise than for purposes connected with the carrying on of activities authorised by the exemption.
Fully exempt CHP station A fully exempt combined heat and power station as defined in Finance Act 2000, Schedule 6, paragraph 148(2).
Generating station A station producing electricity.
Heavy oil Hydrocarbon oil other than light oil.
Licensed supplier The holder of a licence under:
(a) section (1)(d) of the Electricity Act 1989 (supply licences)
(b) Article 10(1)(c) or (2) of the Electricity Supply (Northern Ireland) Order 1992.

Except when the holder is acting otherwise than for purposes connected with the carrying on of activities authorised by the licence.
Light oil Hydrocarbon oil which either:

(a) is not less than 90% by volume and distils at a temperature not exceeding 210°C,
(b) gives off an inflammable vapour at a temperature of less than 23°C when tested in a manner prescribed by the Acts relating to petroleum.
Outputs Electricity or motive power produced in a CHP station and either:
(a) heat or steam supplied from a station
(b) air, or water that is heated or cooled and is supplied from a station
Partly exempt CHP station A partly exempt combined heat and power station as defined in Finance Act 2000, Schedule 6, paragraph 148(3).
Qualifying bioblend Bioblend charged with a duty of excise under section 6AB(2) of the Hydrocarbon Oil Duties Act 1979 on whose delivery for home use no rebate is allowed under section 14B(3) of that Act.
Qualified claimant A person who causes qualifying oil to be used to produce electricity in a generating station or the outputs of combined heat and power station.
Qualifying oil (a) Heavy oil charged with a duty of excise under section 6(1) of the Hydrocarbon Oil Duties Act 1979 on whose delivery for home use no rebate has been allowed under section 11(1) , 13ZA or 13AA of that Act, or in respect of which a payment under section 12(2) of that Act has been made.
(b) Light oil on whose delivery for home use rebate has been allowed under section 14(1) of that Act.
Relevant duty The duty charged on qualifying oil by section 6(1) of the Hydrocarbon Oil Duties Act 1979 less any rebate that has been allowed by section 11(1)[, 13ZA][, 13AA] or 14(1) of that Act
Secretary of State certificate A certificate given by the Secretary of State under paragraph 148(4) or (5) of Schedule 6 to the Finance Act 2000.

Your rights and obligations

Read the HMRC Charter to find out what you can expect from us and what we expect from you.

Help us improve this notice

If you have any feedback about this notice, write to:

HM Revenue and Customs
Excise Fuel Duty Policy
4th Floor East
Trinity Bridge House
2 Dearmans Place
Salford
M3 5BS

Email: oils.policymail@hmrc.gov.uk

This address is not for general enquiries.

You’ll need to include the full title of this notice. Do not include any personal or financial information like your VAT number.

If you need general help with this notice or have another question contact the HMRC Excise Helpline on 0300 200 3700 or email the Mineral Oil Reliefs Centre at morc.exciseenquiries@hmrc.gov.uk.

Putting things right

If you’re unhappy with HMRC’s service, contact the person or office you’ve been dealing with and they’ll try to put things right.

If you’re still unhappy, find out how to complain to HMRC.

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Published 12 January 2016
Last updated 8 February 2024 + show all updates
  1. Hydrotreated vegetable oil (HVO) has been added as an example of rebated heavy oils. The Department for Business, Energy and Industrial Strategy (BEIS) has been changed to the Department of Energy Security and Net Zero (DESNZ). Contact details for the Mineral Oils Relief Centre have been updated.

  2. We have added a link to the contact details for the HMRC Mineral Oil Reliefs Centre in section 2.8.

  3. This notice has been updated to reflect the changes to the use of rebated fuels in the Hydrocarbon Oil Duties Act 1979 and the change to the definition of fuel qualifying for relief under the Hydrocarbon Oil Duties (Reliefs for Electricity Generation) Regulations 2005. We have updated sections 2.3 and 2.11.

  4. First published.