Red Diesel pricing amendment

On Tuesday 25 November, the Government announced a 2 pence increase in fuel duty to come into effect from 1 December 2008. This announcement will have an impact on the pricing of red diesel. 

Reproduced below is an amended example calculation which supersedes the one contained in the recent BMF Red Diesel Guidance Note.  The example applies the 2 pence duty increase.  There is no change to the rate of VAT as HMRC have agreed that the lower 5% rate can be applied to the whole supply.

This example assumes a 60% (propulsion) and 40% (domestic) split for a purchase of 100 litres of red diesel (the price of diesel is assumed to be 70 pence per litre (ppl) which includes 10.07 ppl duty already paid to fuel supplier):

Propulsion calculation (i.e. 60%)
60 litres @ 70 ppl     = £42
60 litres @ 42.28 ppl   = £25.37   (additional duty)
VAT @ 5%            = £3.37  
Propulsion Total        = £70.74

Domestic calculation (i.e. 40%)
40 litres @ 70 ppl     = £28
VAT @ 5%                = £1.40
Domestic Total         = £29.40
Transaction Total = £100.14