Hydrocarbon Oils Duty (HCO)

Hydrocarbon Oils Duty is paid to HMRC on motor and heating fuels produced, imported, or used in the UK. The duty is payable at varying rates depending on the type of fuel and its use. It covers hydrocarbon mineral oils, biofuels, fuel substitutes, and fuel additives.

Reliefs or refunds may apply in specific circumstances, including where fuel is exported for use outside the UK.

Hydrocarbon mineral oils are organic compounds consisting of hydrogen and carbon. They are the principal constituents of petroleum and natural gas, and are widely used as fuels, lubricants, and raw materials in the production of plastics, fibres, rubbers, solvents, explosives, and industrial chemicals.

Businesses producing products liable for fuel duty may be required to store oils in premises approved by and registered with HMRC as an excise warehouse. Duty is generally payable when the oils leave the warehouse. A lower rate of duty may apply in certain cases, including red diesel and marked kerosene.

• Biofuels: Biodiesel is a liquid fuel produced from biomass or waste cooking oil suitable for use in diesel engines. Bioethanol is ethanol produced from biomass and capable of being used for similar purposes as light oil.
• Fuel substitutes: A fuel substitute is a liquid, other than water in certain circumstances, that is not hydrocarbon mineral oil, biodiesel, bioethanol, or a bioethanol blend, but is used to fuel an engine, motor, machinery, or is added to motor fuel.
• Fuel additives: Any liquid added into the fuel supply of vehicles, whether through the filler cap or other parts of the fuel system, may be classed as a fuel additive.

Biofuels and other fuel substitutes are liable for Fuel Duty when they are intended for use as fuel for an engine, motor, or other machinery, as an additive or extender in fuel, or to be blended with hydrocarbon oil. They are not liable for duty when intended for other specific uses, such as heating fuel.

When biofuels and fuel substitutes are liable for Fuel Duty, the duty is generally due at the earliest relevant duty point.

• When they are sent out from premises registered for production
• When they are used as a motor fuel
• When the decision has been made that they will be used as a motor fuel, known as being “set aside” as motor fuel

The rate of duty on biofuels, fuel substitutes, and additives is worked out by reference to the proposed or actual use of the fuel and the type of engine. For example, where a substitute or additive is to be used as a road fuel in a diesel engine, the diesel road fuel rate will usually apply.

Rates of duty are usually calculated in pence per litre, although certain types of road fuel gas are charged per kilogram of fuel.

For more information on duty rates, see the official guidance: Fuel Duty – GOV.UK.

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