I NOTED with some concern that ‘blame' is being apportioned to Association of Pleasure Craft Operators (I am not a member) and others for the reluctance of some boatyards and chandleries to continue to sell red diesel, writes Orph Mable.
So I thought I would try and show that we retailers of red diesel are not ‘running scared' but actually applying sound business sense just to keep our businesses afloat.
Buying-in and reselling diesel is not a simple process, and not gone into lightly. The legal requirements are very stringent on the storage of the stuff and the tanks must meet strict EA regulations. The reseller must be registered and approved by HM Revenue & Customs (HMRC) with regular checks on documentation and customer base (Oh yes—that is checked, not often I grant you, but it is checked).
HMRC also verifies the amount bought in and then resold with amounts and customer number figures sent in monthly with the registered dealer being liable for a fine for late submission!
When buying-in red diesel, the larger the quantity per delivery the lower the price however there is a drawback to this simple equation. On deliveries of less than 2,400 litres VAT at 5% is paid by the purchaser. However on orders over this amount VAT at 20% is paid on the full delivery.
For small and medium sized enterprises such as ourselves, we pay and record VAT on a ‘cash basis' i.e. each transaction is liable for the VAT at the time the cash changes hands meaning that the full 20% is paid, there and then on deliveries. On the ‘domestic' diesel sales we only recover VAT at 5%.
Whilst the difference is eventually recovered from HMRC, it can take as long as four months from the date of re-sale until the next quarterly VAT return date. This is a big load on cash-flow and difficult to contain. It should be pointed out that there is also a similar VAT anomaly on ‘Calor Gas'!
Selling to boaters
When selling red diesel to boaters we all appreciate now that there are two different rates; propulsion and domestic. The percentage of each should be declared at the time of purchase by the purchaser (the boater!). I can understand why some yards ‘fix' this percentage at the suggested 60/40 split to keep things simple but do not condone it. The purchaser is still required to sign a declaration for the 60/40 split and if the seller ignores this they will have to answer to HMRC eventually.
The time, effort and associated paperwork at the end of each month for the boatyard is a great burden and not trivial as implied elsewhere. The propulsion proportion is priced at the domestic rate (including 5%VAT), plus the additional Fuel Duty (the rate of which seems to continually increase) plus 20% VAT on the additional Fuel Duty. The additional Fuel Duty charged must be recorded per sale and the amount received by the seller forwarded to HMRC annually in November. There is a penalty for late payment! The increase on the domestic diesel price must be calculated for each percentage of propulsion split when ‘self declaration' is in operation.
In addition to the actual buying and selling of red diesel, the costs of insurance of the stock, the actual cost of storage and operating the pump plus the wages of the staff to sell the stuff is ever increasing. In my opinion it is not possible to allow self-service due to strenuous H&S issues plus ensuring that each sale is recorded accurately—so no savings there!
Hopefully it can be seen that the delayed ‘returns' on outlay and excessive effort, regulations and ‘hassle-factor' in supplying red-diesel does not really warrant the ‘value' to any business in today's economic environment.
Having written all this, I wonder why any of the boatyards I know, actually continues to sell red diesel to boaters. So before pointing wagging fingers at any particular body for ‘scare mongering' please consider the full implications currently on boatyards continuing to sell red diesel.