HCOTEG12870 | Introduction and overview of oils activity: excise duty on oils (Duty Liability): electricity generation

Electricity generators using rebated heavy oil, in particular gas oil and fuel oil as part of the generating process, used to pay hydrocarbon oil duty. As Climate Change Levy (CCL) is chargeable on taxable supplies of electricity made by electricity utilities (or those treated as such under the CCL legislation), most generators using coal or natural gas do not have to pay any form of tax on their input fuel.

Therefore, electricity generated from oil could have been subject to double taxation - on the input fuel (under hydrocarbon oil duty) and on the electricity output (under CCL). To avoid this, the Government introduced relief from duty for oils used in electricity generation from 1 January 2006.

Relief must be claimed by a qualified claimant, who is a person who causes qualifying oil to be used to produce electricity in a generating station or the outputs of a combined heat and power (CHP) station.

Qualifying oil includes heavy oil and certain light oils that meet the conditions for relief. Further information on relief from excise duty on oils used to generate electricity can be found in Excise Notice 175.

Biofuels used to generate electricity are also eligible for relief from duty. This is provided for by Part 7 of the Biofuels and Other Fuel Substitutes (Payment of Excise Duties etc) Regulations 2004.

Further information on biofuels used to generate electricity can be found in Excise Notice 179E.