This clause extends the civil penalty provisions which Customs can apply when they detect the misuse of rebated heavy oil as road fuel. These provisions take effect from 1 May 2000.

2. Subsection (1) - provides that section 13 of the Hydrocarbon Oil Duties Act 1979 shall be amended by the other sub-sections. Section 13 sets out the contraventions which give rise to a civil penalty, imposed under section 9 of the Finance Act 1994, where Customs detect misuse of rebated heavy oil (red diesel or kerosene) as road fuel.

3. Subsection (2) - amends section 13(1) of the Hydrocarbon Oil Duties Act 1979. Section 13(1) specifies the contraventions which give rise to a civil penalty for any person either "using" rebated oil as a road fuel or being liable for the "taking-in" of rebated oil to a road vehicle. The amendment provides for the imposition of cumulative civil penalties where an individual has contravened both restrictions. The clause also removes from section 13(1) the provision for assessment of an amount equal to the rebate.

4. Subsection (3) - inserts a new subsection (1A) in section 13. The new subsection mirrors the provision omitted from section 13(1) by subsection (2) above and allows the Commissioners to assess for an amount equal to the rebate on the rebated oil used in, or taken into, a road vehicle.

5. Subsection (4) - provides that the new clause shall have effect in relation to a liability arising on or after 1 May 2000.

6. The Finance Act 1994 decriminalised some of the contraventions applicable to the use of rebated oil as road fuel. It was intended, at that time, that there would be two separate contraventions under section

13(1)(a) & (b) of the Hydrocarbon Oil Duties Act 1979; one in respect of liability for rebated oil being taken into a road vehicle’s fuelling system and another for using that fuel on a public road. Customs, therefore, imposed two civil penalties, totalling £500, in respect of detections of misuse and this was felt to be an adequate measure to ensure compliance with the statute.

7. On 5 March 1999 the Court of Sessions in Edinburgh determined that Customs’ interpretation of the legislation was incorrect and that the penalties under section 13(1)(a) & (b) in relation to a single individual were alternative and not cumulative.

8. Each penalty is in the amount of £250 and, if imposed in the singular, the amount is not enough of a deterrent to prevent misuse. £250 is equivalent to less than 10 full tanks of red diesel in a car, and less than 1 full tank for a lorry. Given the difference in the duty rates between diesel and red diesel (currently 45.69 pence per litre) the savings far outweigh the penalty Customs are currently able to impose. Penalties totalling £500 will deter potential offenders to a much greater degree.

9. The level of penalty is to be used as a deterrent against first time offenders where it would not be justified to prosecute the case as fraudulent evasion of duty. During 1998/99 Customs’ mobile road fuel testing fleet recorded a total of 2007 cases involving the misuse of rebated oil as road fuel. The majority of these were first time offenders, who were penalised under the provisions of section 13(1).

10. The two penalties are required to ensure compliance across the range of diesel users. This clause will be welcomed by all legitimate road hauliers and by both the Freight Transport Association and the Road Haulage Association as it will deter the "cowboy" element of their industry from using cheaper red diesel.

11. This measure takes effect from 1 May 2000.