- Energy Saving
A guide to fuel oil duty rebate for horticulture
Horticultural businesses benefit from a rebate on the duty paid on fuel oils, whether to heat a building or growing medium, as long as it is used to grow produce.
This can be worth as much as 10.4 pence per litre (p/litre) of fuel. With the current price of gas oil being around 45 p/litre this is clearly a significant saving.
However, there can be some confusion over:
- Which fuel oils are exempt
Whether the price paid to a fuel oil supplier
- Includes fuel oil duty and it has to be reclaimed from HMRC
- Automatically excludes it.
This article clarifies the position.
|Type of Fuel||Oil Duty rate p/litre|
|Heavy fuel oil||10.37|
This is the amount of duty that should be included in the price paid to your fuel supplier — which you can then later reclaim from HMRC under the horticultural exemption.
The supplier must include duty in the price, so it is up to you to ensure you take advantage of this rebate afterwards for gas oil and heavy fuel oil.
Kerosene is the exception, being the only fuel oil which can be bought duty free if it is strictly for heating purposes. You may want to carefully check the bills from your supplier as unlike VAT, duty is not necessarily itemised. You may find that sometimes, suppliers add a duty of 10.8 pence to your supply price. This has probably happened because they don’t know you are using kerosene for heating, and you should clarify this with them.
Which is cheaper?
If you have a quote for gas oil of 45 p/litre and another for kerosene of 38 p/litre, what is the cost per kilowatt-hour (kWh) of energy?
The following table lists the energy content (kWh) per litre of oil.
|Type of fuel||oil kWh/litre|
|Heavy fuel oil||11.9|
The cost per litre includes duty at the rate of 10.80 p/litre
Therefore the net cost = 45 – 10.8 = 34.2 p/litre.
- 1 litre contains 10.9 kWh, so the cost per kWh = 34.2 / 10.9 = 3.14 p/kWh.
- There is no duty applied to kerosene so the net cost remains at 38 p/litre.
- 1 litre contains 10.3 kWh so the cost per kWh = 38 / 10.3 = 3.69 p/kWh.
Although the above figures are just for demonstration, you will find that, in terms of the cost to you per kWh of energy, kerosene is always more expensive than gas oil in any situation as it is a much more refined, cleaner fuel.
Why would you use kerosene?
Kerosene burns much more cleanly than gas oil. As a result, if you allow the flue gases to enter a greenhouse there is little risk of a build up of pollutants such as nitrogen oxide (NOx) and sulpher oxides (SOx), which could potentially cause crop damage.
The main applications for kerosene are:
- Where frost protection heating is required and where direct fired, flue-less blown air heaters are used.
- For CO2 enrichment when mains gas is not available.
For the ‘letter of the law’ on this subject try www.hmrc.gov.uk.
Specific pages of more direct relevance are: