The European Commission is taking the United Kingdom to the EU’s Court of Justice in the latest move in a long-running dispute over Britain’s policy of allowing private leisure craft to use low-tax red diesel.

In a statement issued yesterday, the commission said it had decided to take Britain to court for “not properly applying the rules on fiscal marking on fuel.”

Under EU rules, fuel that can benefit from a reduced tax rate has to be marked by coloured dye. Fishing vessels and farming machinery, for example, are allowed to benefit from a lower taxed fuel but the commission insists private leisure boats must use fuel subject to a standard rate.

Red diesel can be up to 40 per cent cheaper than fuel sold in petrol stations in the UK.

The UK government does require boats using red diesel to pay full duty and acknowledge they may face penalties for using it outside its waters, according to a BBC report.

Red diesel can be used by UK boats for heating purposes but using it to power engines is illegal.

The commission complains that UK law does not require fuel distributors to have two separate fuel tanks to distinguish between the lower tax marked fuel and the fuel subject to the standard rate: “As a result private leisure boat owners are often in a situation where they can only purchase marked fuel. As a consequence, private leisure boats may not pay the right amount of tax, as they purchase use fuel normally intended for fishing vessels.”

“Not only does this go against EU excise rules, but it also puts private boats at risk of heavy penalties if they are checked by local authorities when they travel to another member state.”

An opt-out from the EU directive allowed British leisure craft owners to use red diesel for several years but this opt-out ended in 2006.

The commission sent a “reasoned opinion” to the UK in 2013, trying to force the government to bring its legislation into line with EU law. According to the BBC, the UK did change the law that year to require boat owners and fuel distributors to sign a form acknowledging that its approach to red diesel only applied in UK waters and not the rest of the EU.

However, the commission says Britain has still failed to bring legislation in line with EU law and so is taking the UK to court.