From June 30 the existing fuel duty on biofuels – 28.35p per litre – will be cut for those producing less than 2,500 litres a year. For those producing less than 450,000 litres a year, there will also be a reduction in the amount of paperwork they have to complete.
The amendment to legislation is aimed at those producing and using biofuels themselves – for example, people that use vegetable oil to power their cars on the road. At the moment such people have to account for every litre they use and send a month return to HM Revenue and Customs.
The new rules should encourage people to use biofuels, at least in small amounts.
But an HMRC spokesman said there were no plans for a similar cut in duty for larger biofuel producers, which would likely mean cheaper prices and more incentive to fleets to use them.
An increased use of biofuels is part of the government’s target in the proposed Renewable Transport Fuels Obligation (RTFO) – it wants to see biofuel make up 5% of all fuel sold by 2010/11.
The HMRC spokesman said: “It’s not to say that there isn’t anything in the pipeline for larger producers but there is nothing concrete.
“It’s an issue we keep under advisement at all times. This is very much a measure to encourage small-time producers. Further measures have yet to be decided.”
Smaller biofuels producers have welcomed the changes. There are currently 1,400 biofuels producers in the UK, a large proportion of which produce for their own personal use.
Richard Price, managing director of biodiesel market supplier Filtertechnik, said: “I anticipate this will lead to an explosion of biofuels producers who will create a new ‘homebrew’ market. It is a very exciting time to be in the biofuels business.”
Roger Flynn, of industry organisation Biofuels Media, said: “This is great news and shows that the Government is committed to developing a grass roots base for the future of biofuels in the UK.”