ICAEW's Tax Faculty provides a summary of the announcements in the 2021 Budget on duties, covering air passenger, alcohol, fuel, gaming, vehicles, customs and tobacco duties.
Air passenger duty
The long-haul rates of air passenger duty (APD) for the tax year 2022 to 2023 will increase in line with the retail price index (RPI) as forecast at Budget 2021. Short haul rates will not rise. The rates will be as follows from April 2022:
|Bands (distance in miles from London)||Reduced rate (lowest class of travel)||Standard rate (1) (other than the lowest class of travel)||Higher rate (2)|
(0 – 2,000 miles)
(over 2,000 miles)
The gross gaming yield bands for gaming duty will increase in line with RPI for gaming duty accounting periods starting on or after 1 April 2021.
Vehicle excise duty rates
The vehicle excise duty rates for cars, vans, motorcycles and motorcycle trade licences will be uprated by RPI with effect from April 2021.
Administrative amendment to vehicle excise duty expensive car supplement
Owners of cars with a list price exceeding £40,000 pay an additional supplement as well as paying the standard rate. The supplement is paid for a period of five years from the start of the second vehicle licence but for a period of no longer that six years from when the vehicle was first registered. The vehicle licence end date and the supplement end date can become misaligned because of the vehicle being sold or the vehicle being declared off road.
The vehicle excise duty legislation will be amended with effect from 1 April 2021 to ensure that where the vehicle licence end date and the expensive car supplement end date do not align, registered keepers of cars in their last year of paying the expensive car supplement are issued correct vehicle excise duty refunds when required.
Heavy goods vehicle levy
Collection of the levy was suspended for 12 months from 1 August 2020 to support the haulage sector during the coronavirus pandemic. Budget 2021 announced that the levy will be suspended for a further 12 months from 1 August 2021. HGV levy rates will also remain frozen in 2021 to 2022.
Consolidation of tobacco duty rates into Finance Bill 2021
An increase to the excise duty rate on all tobacco products took effect from 16 November 2020. The increased rates will be consolidated by amending the Table within Schedule 1 of the Tobacco Products Duty Act 1979.
Fuel duty rates
Fuel duty rates will remain frozen for the financial year 2021 to 2022.
Alcohol duty rates
All alcohol duty rates are to remain frozen. There will be no revisions to existing legislation and no new legal provisions will be introduced.
Red diesel and other rebated fuels reform
Motor and heating fuels are liable to fuel duty, but as fuel duty was intended to be a tax on road vehicles, this requires some fuels to be taxed at a lower (rebated) rate. Rebated diesel (red diesel) is chemically marked with a dye to prevent fraud. The entitlement to use red diesel and rebated biofuels will be restricted to the following qualifying purposes from April 2022:
- vehicles and machinery used in agriculture, horticulture, fish farming and forestry. This includes allowing vehicles used for agriculture to be used for cutting verges and hedges, snow clearance and gritting roads
- propelling passenger, freight or maintenance vehicles designed to run on rail tracks
- heating and electricity generation in non-commercial premises - this includes the heating of homes and buildings such as places of worship, hospitals and town halls; off-grid power generation; and non-propulsion uses on permanently moored houseboats
- maintaining community amateur sports clubs as well as golf courses (including activities such as ground maintenance, and the heating and lighting of clubhouses, changing rooms etc.)
- fuel for all marine craft refuelling and operating in the UK (including fishing and water freight industries), except for propelling private pleasure craft in Northern Ireland
- powering the machinery (including caravans) of travelling fairs and circuses.
Fuel duty will also be extended to biodiesel, bioblends and fuel substitutes used in heating, applying the rebated duty rate to non-commercial heating and the full rate of duty to commercial heating. Changes will also be made to cover penalties for contravening restrictions on the use of rebated fuels. The legislation will provide for secondary legislation to enable HMRC to disapply its powers to seize vehicles or other machinery in certain circumstances.
To help ensure compliance and minimise the risk that white diesel that has had the full duty rate paid on it is contaminated with the red diesel marker, registered fuel suppliers that switch a fuel tank from red to white diesel will need to flush out the tank and supply lines until no trace of marked rebated fuel remains.
- Reform of red diesel entitlements
- Consultation on reforms to the tax treatment of red diesel and other rebated fuels
Taxation of diesel used in private pleasure craft in Northern Ireland
As stated above, users of diesel-powered private pleasure craft in Northern Ireland will be prohibited from using red diesel to propel their craft. A new relief scheme will be introduced in Northern Ireland to ensure that craft users with only one fuel tank on board do not have to pay a higher rate of duty on their non-propulsion use than they would otherwise have to pay (those with separate fuel tanks for propulsion and non-propulsion can continue to use red diesel for non-propulsion). These changes will all take effect no later than June this year.
This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.
More on Budget 2021
Read the rest of the Tax Faculty's summary of the tax related announcements in the Budget on 3 March 2021.Read now