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Seeing red over dodgy diesel

31st january 2013
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Page 9, 31st january 2013 — Seeing red over dodgy diesel
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Which of the following most accurately describes the problem?

The problem of illicit fuel refuses to go away. CM looks at measures underway to deal with it Words: Robin Meczes WITH UK HAULIERS struggling to keep their heads above water because of the crippling price of fuel, the presence of the illicit fuel business, endemic in parts of the UK and Northern Ireland, is shocking in itself. And a CM investigation has found that the authorities can't ultimately say just how widespread the issue really is.

HMRC, however, says the problem is not out of control, stating its regular discoveries of fuel laundries (where the dye used to mark rebated fuel is removed) and illicit filling stations reflect the success of its fight against the criminal organisations behind the supply of such diesel.

Busy year The authorities were certainly busy last year, with HMRC discovering 25 fuel laundering sites in the UK —22 of them in Northern Ireland. A further 11 were discovered in Ireland during the first 10 months of the year, according to HMRC's counterpart, the Office of the Revenue Commissioners.

These are not tinpot facilities in volume terms either, with two of the laundries found last year in County Armagh capable of producing an estimated 15 million litres between them annually.

This, however, pales into insignificance compared with another site in County Armagh, discovered in 2011, that had an estimated capacity of 30 million litres a year — or £20m in lost tax revenue.

But how many other sites remain undiscovered, or have been freshly established since then in either territory, is anybody's guess, making it hard to gauge if this represents a decisive blow or merely a skirmish in an ongoing war.

HMRC suggests that in 2010-11 the market share of illicit diesel in Britain was about 1% to 4%, and that lost revenue to the Treasury lay between £150m and 000m.

In Northern Ireland, it was estimated that non-UK, duty-paid fuel (including fuel bought legitimately in Ireland) accounted for 21% to 30% of the market, with a loss to the UK Treasury of £120m to £190m.

Whatever the true scale of the problem, operators being continuously undercut by those willing to flout the law and use the cheaper fuel could be forgiven for feeling that more needs to be done.

One issue is the low number of criminals who are brought to justice and, even where they are, their sentences tend to be light.

HMRC national oils co-ordinator Pat Curtis told CM that readers would be shocked by the number of suspended sentences in such cases, admitting that fuel laundering attracts lighter sentences than other tax fraud.

Figures from HMRC show that during the first 10 months of 2012, only nine people were convicted of laundering, and every conviction led to a suspended sentence.

Enforcement In terms of on-the-road enforcement, although HMRC has 100 specialist staff constantly involved in tracking down the use of illicit fuel, they have to cover the whole of the UK and are split into 50 two-man teams. Enforcement falls squarely under HMRC; Vosa officers and traffic police are not in a position to help by checking vehicles they stop for the use of illicit fuel, as the nature of the checks needed to detect laundered diesel requires specialist chemicals handling training, and mobile vehicle laboratories.

Then there is the issue of fines and penalties for those found using the fuel. In terms of civil penalties, these include excise penalties likely to amount to at least £500 a time, plus a wrongdoing penalty equivalent to the lost VAT and duty that would apply to a full tankful of fuel. This sanction can extend upwards to your vehicle (and goods) being seized and forfeited. There is also the possibility of criminal prosecution. Whether such penalties are stiff enough, however, is debatable.

Insufficient fines Jack Semple, policy director at the Road Haulage Association (RHA), says: "From our point of view, the fines imposed by HMRC do not come close to matching the financial benefit that a regular user of illicit diesel gets."

Of course, action against drivers or operators who are responsible for the use of illicit fuel may also be taken by traffic commissioners (TCs), who can call both drivers and 0-licence holders to account via an inquiry. But they don't always get to hear about the problem because, up to now, HMRC has worked largely in isolation without any automatic process to keep TCs in the loop — something the RHA has flagged up as an obvious issue.

Senior TC Beverley Bell and her colleagues share this concern. "We feel we don't get enough referrals from HMRC about the use of illegal fuel," she says.

Irrespective of the information vacuum around the issue, the situation looks set to improve. HMRC and TCs are in talks to establish a working link between them to tackle illicit fuel. Bell says: "These talks are positive and ongoing." And Semple says: "This would be a welcome and significant development."

Elsewhere, the fight against the illicit fuel trade is being notched up in various ways. The Northern Ireland Select Affairs Committee acknowledges the seriousness of the crime is not reflected in the sentences handed out. The introduction of 0-licensing in Northern Ireland, meanwhile, means operators there now have a licence to take action against if they are caught flouting the rules.

On top of this, says Curtis, Ireland has recently introduced a scheme similar to the UK's whereby those selling rebated fuel are required to be registered and make certain checks on purchasers, which should make it harder to get hold of rebated fuel there in the first place.

In all of this, one thing that is without doubt is that fuel laundering is not going away. As another HMRC source admits to CM: "The problem will never go away — and the reason is that the people behind it are making money out of this. While there is a demand for this product, there will always be a supply." • • Anyone with information about the production, supply or use of illicit fuel should contact HMRC's free hotline on 0800 595000.

Ireland and the UK are jointly attempting to develop a new fuel marker that is harder to remove from fuel than the current ones. Curtis says 11 tenders to supply such a marker are being evaluated and a final result may be available by April — although it is not clear get just how much more difficult any new marker will be to launder out, he admits.

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