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Last Updated: Monday, 14 November 2005, 16:18 GMT
Tax threat to green fuel company
Dolly Knight and Jonathan Stromberg
Dolly Knight and Jonathan Stromberg are fighting the ruling
A company that produces environmentally-friendly fuel for cars may have to close because it has been told it must pay more tax.

Plymouth Bio-Fuels is no longer eligible for a 20p-a-litre tax break and HM Revenue and Customs (HMRC) has demanded 16,000 in back duty.

The Plympton-based firm is one of 31 in the UK which makes a diesel-type fuel from waste vegetable oil.

HMRC said the new grading followed consultation with the industry.

Jonathan Stromberg, 36, who launched Plymouth Bio-Fuels in 2003 with former GP Dolly Knight, 58, said customs officers suddenly made the decision, even though officers had been visiting the plant for two years.

He said: "Everything was fine and they knew how we were making our fuel.

It is completely crippling, we would never be able to continue this
Dolly Knight, Plymouth Bio-Fuels

"And just recently they have changed the goalposts. They have decided that only a very specific type of bio-fuel meets the requirements for a lower rate of duty."

Bob Gaiger of HMRC said: "I am not able to comment on specific cases, but Revenue and Customs has consulted with the trade and we have agreed that cooking oil has to go through a specific manufacturing process for it to be eligible for the lower duty rate."

That process, called transesterification, means bio-power firms would have to apply for an expensive licence to include noxious chemicals into the fuel.

Mr Stromberg said small firms like his could not meet the cost.

'Environmental conscience'

Plymouth Bio-Fuels produces 7-10,000 litres of fuel a month to about 300 customers, with a gross profit of 15-18p a litre.

Dr Knight said: "It is completely crippling, we would never be able to continue this simply because the 20p is not even what we make by selling the fuel.

"As directors we are not getting any wages or dividends. We are doing it because of our environmental conscience."

Other members of the Bio-power (UK) group of companies that produce fuel from waste oil have successfully fought similar tax demands.

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