Many smaller producers could face closure after HMRC announced a clarification of the rules on producing biofuel that removes a 20p per litre tax break for those not making the fuel through a certain process.
The Government has announced plans to make 5% of all road transport fuel from renewable sources, but critics believe the HMRC move is intended to marginalise smaller producers in favour of the global oil giants.
Dr Dolly Knight, director of Plymouth Biofuels, said the move would destroy her business if an appeal lodged with the Government failed. She has been told to pay £16,000 in back duty, even though a Customs inspector earlier this year gave the firm the all-clear.
Plymouth Biofuels collects waste cooking oil and blends it with other natural ingredients to produce a fuel which works in most diesel cars. It has business customers including haulage and taxi firms.
Knight said the move smacked of hypocrisy from a Government championing biofuel. She added that the process eligible for tax breaks – ‘transesterification’ – adds chemicals to the fuel which produces higher emissions than natural biofuel. She said: ‘The whole thing stinks.
If we go bust, our customers will go back to regular diesel. It will be worse for the environment and cost them more.’
HM Revenue and Customs spokesman Robin Burt-Campbell said: ‘Currently the only method that we are aware of that produces a diesel quality fuel is transesterification.
‘This does not exclude other methods necessarily, and we would welcome evidence on other possible methods and their effectiveness.’
Teesside-based Biofuels Corporation’s shares were suspended after months of delays on site. Its future rests on successful conclusion of refinancing talks.
It is hoping to start production before Christmas but needs at least £30 million to cover costs.