Hello, I'm Keith and happy to help you with your question. My news, I fear, is not good.
HMRC rules on this matter are:
'2.4 What are my obligations?
If you produce 2,500 litres or more biofuels a year, or use 2,500 litres or more of biofuels as motor fuel on which duty has not been paid, you will need to contact us so that we can make arrangements for you to account for the excise duty due on any products set aside, or delivered for use, as a motor fuel.
You will need to do the following:
'Make entry' of your premises (in other words, register with HMRC as a producer and/or user of biofuels).
Keep records relating to the production and trade in biofuels.
Issue detailed delivery notes for each supply of biofuels.
Complete and send returns to HMRC showing the excise duty due for the return period (for example, 1 June to 30 June).
Pay the excise duty due (see paragraph 4.4).
Note: If you have produced less than 2,500 litres in the last 12 months, or if you expect to produce less than this amount in the next 12 months, you may be an exempt producer. If you are an exempt producer you are only required to keep production records (see item 2 in the above table).
2.5 Making entry (registering your production)
You can download registration forms from our website. If the business is a sole proprietor or a partnership you should complete ‘excise entry' form EX 103 and if the business is an incorporated company, form EX 103A. You can also contact the Helpline on 0300 200 3700 for copies of the forms.
Completed forms should be sent to:
HM Revenue & Customs
Mineral Oil Reliefs Centre
Building 4, BP4002
Benton Park View
Newcastle upon Tyne
Following receipt of your application, you may be visited to examine the suitability of your premises.'
From this you can see that HMRC are correct in their approach, though perhaps a trifle over-zealous. You should appeal against their assessment by means of a letter and ask to mitigate the duty payable. However, to be fair you did actually exceed the permitted maximum and simple mistakes are not an excuse, just try sneaking 2 bottles of spirits through the UK Border Agency!
As a tip never, ever, under any circumstances whatsoever speak directly to an HMRC officoal. Always ask for their comments in writing and respond accordingly. There is always a danger of verbal communications being misconstrued.
Please note that if you have a follow up question I will not be on line again until Sunday.