A biofuel pioneer who champions the use of chip oil in cars and lorries says he has received a 'slap in the face' from HM Revenue and Customs.

Mike Lawton, chief executive of Regenatec, a Futuretec business unit based at Milton Business Park, near Abingdon, has invested about £200,000 and three years' work perfecting a fuel from used chip oil for use in diesel engines fitted with his special device.

Now Revenue and Customs has hit his budding business with a 73 per cent duty hike, bringing the tax payable on vegetable oil fuel (new and used) to 47p per litre -- the same as for petrol or diesel.

He said: 'Until now, used vegetable oil has qualified for a 20p reduction on the 47.1p/litre imposed on the polluting fossil fuels of petrol and diesel, enabling the fledgling biofuel industry to grow.

'There's been no change in the law, but HMRC has suddenly chosen to reinterpret the law and remove the financial incentive.

'Cleaner burning and CO2-neutral veg oil is now treated in the same way as a polluting and non-renewable fossil fuel. This puts the UK at complete odds with mainland Europe where, in some cases, no duty is levied.'

Mr Lawton has also persuaded other companies at Milton Park, including removals firm Lakehaven, to use his revolutionary fuel.

The park even uses the fuel for its own minibus service.

Lakehaven has adapted five of its lorries with Regenatec's devices, which until now enabled them to fill up with chip oil at 69p a litre.

Gordon Matthews, of Lakehaven, said: 'It's just senseless. Regenatech and M&M Commercials converted our vehicles free of charge in return for our maintenance contract, so we haven't lost money. But just when we thought we were doing our bit, this happens.'

Paradoxically, in the same week as HM Customs reinterpreted the existing law and announced the duty rise, the Government committed itself to promoting biofuels.

Transport Secretary Alistair Darling announced that five per cent of all motor fuel sold in Britain would have to come from renewable sources by 2010.

The requirement will lead to a 20-fold increase in biofuels use, but the problem for Mr Lawton is that chip oil is not classified as biodiesel, but as a fuel substitute.

Mr Lawton said: 'It's a slap in the face.

'To make fuels that Customs categorise as biodiesel involves a hugely energy-hungry process.'

A spokesman for HM Revenue and Customs said: 'The public notice reflects what the law says -- that biodiesel is a 'diesel quality liquid fuel produced from biomass or waste cooking oil' and not vegetable oil itself.

'We have therefore concluded that vegetable oil used as a fuel substitute is not biodiesel, and does not qualify for the reduced rate of duty.'