The deadline may have come and gone – but if you are still unsure about how red diesel duty reform affects you and your business, don’t worry. We are here to help.
Duty equalisation is the biggest change that the fuel industry has seen in decades, and we are committed to supporting our customers through every stage of the transition. Here, we have answered the most frequently asked questions about the red diesel changes so you can ensure you are complying with the law.
Where can I find all permitted and non-permitted usages of red diesel from April 2022?
Red diesel usage is now restricted to the following qualifying purposes:
• for vehicles and machinery used in agriculture, horticulture, fish farming and forestry
• to propel passenger, freight or maintenance vehicles designed to run on rail tracks
• for heating and electricity generation in non-commercial premises, including state schools and hospitals
• for maintaining community amateur sports clubs as well as golf courses
• as fuel for all marine craft refuelling and operating in the UK, except for propelling private pleasure craft in Northern Ireland
• for powering the machinery of travelling fairs and circuses
Those no longer permitted to use rebated fuel need to use fuels (diesels or biofuels) upon which full excise duty is paid, such as white diesel. For clarification on compliance, contact HMRC’s Red Diesel Entitlement Policy Team at reddieselentitlement@hmrc.gov.uk
If a contractor is filling up agricultural equipment with red diesel, can the same equipment be used on a construction site?
The red diesel rule changes do not apply to machinery types, but to specific use or application. Equipment can still use red diesel, but only in an agricultural setting for agricultural purposes – no traces can present in the tank when the equipment is used on a construction site. Supplies of both red and white diesel need to be kept separate and tanks and supply lines flushed in-between permitted and non-permitted uses.
Can public sector bodies use red diesel for non-commercial purposes?
Public sector bodies can use rebated fuel for heating and electricity generation, if the premises is used for non-commercial purposes. Any use of red diesel for commercial gain is no longer permitted, including construction work, private waste management and ground maintenance.
HMRC does not consider commercial purposes to include delivery of a service, where it’s intended that any profit made will only ever be used to cover the costs of delivering that service. For example, a café in a library enhances the overall experience for the public, whilst contributing to its running costs.
Public sector bodies that use fuel for both commercial and non-commercial purposes must keep their stores of rebated and duty paid fuels separate.
Does industrial heating oil and kerosene continue to receive a duty rebate?
Both Industrial heating oil and kerosene attract the same duty rebate as before. The government is consulting with the industry on future plans, so while rates may be subject to change at some point, right now both fuels are unaffected.
Can I get a licence to run down rebated fuel stores obtained after 10 June 2021?
Non-qualified users are permitted to run down stock of rebated fuel after April 2022 if the fuel was obtained and stored on or before 10 June 2021. It must only be used for contingency back-up electricity generation or critical safety and environmental protection applications.
Stocks of rebated fuel obtained after 10 June 2021 may be used for the above purposes, until stores are depleted, if a special licence is granted by HMRC.
Applications must be made directly to HMRC and licenses are only provided in exceptional circumstances.
Can special licence holders still benefit from rebated rates on red diesel?
If HMRC approves a license, the licence holder still needs to pay the difference in duty on the remaining red diesel, so rate relief does not apply.
I haven’t used my machine since the law change – am I able to use up the remaining red diesel in the tank of my machine?
If red diesel is still sitting in the tank of a machine or vehicle that is no longer permitted, it CAN be used up until the tank is empty—if the same tank is not refilled with red diesel again.
Will the government check red diesel stocks after April 2022?
Spot checks are likely and rule breakers risk significant fines. The government relaxed initial rules around tank flushing, meaning red diesel wasn’t required to be flushed out of tanks and lines once supply was used up. Purchasing and delivery documentation should be kept safe and accessible, to provide HMRC inspectors with a clear audit trail and demonstrate compliance and prove that there has been no stockpiling of red diesel.
I am a farmer. Can I use red diesel for any activity and in any vehicle?
The rules refer to how red diesel is used, not who uses it. If a farmer uses red diesel for a purpose outside of the ways they would ordinarily use it, they may be breaking the law. The government has said that if farmers use rebated fuel in agricultural vehicles for purposes relating to agriculture, red diesel can be used in these vehicles for any other purpose on private land where they are ordinarily kept. The full list of accepted ways in which red diesel can be used and the types of agricultural vehicles that can continue using it is available on the government website.
Can I use red diesel in my farm’s tractor on a public road?
Red diesel is permitted for use on public roads as long as the tractor is designed and constructed for off-road use and is used only for purposes relating to agriculture, horticulture or forestry, for cutting verges, hedges or trees bordering public roads, and road gritting. A list of accepted uses of a tractor for ‘purposes relating to agriculture’ is published here.
Can red diesel still be used for tractor charity runs, plough matches or agricultural shows?
As agricultural shows and ploughing matches provide information and education that benefits agricultural purposes, and because tractor runs promote the industry, the government considers that running or participating in these activities are purposes relating to agriculture.
Can I use the same equipment for agricultural purposes and non-permitted use?
To use the same equipment for non-permitted use after agricultural use, farmers need to drain and flush out the diesel tank to remove traces of rebated fuels.
I work in the transport industry – do I need to know about the changes?
Though white diesel is widely used in haulage, the changes still impact the industry. Red diesel can no longer be used to power commercial refrigeration units, to power machinery in depots or to provide heat or power at commercial locations.
The only exception is in safety-critical or emergency circumstances, or for environmental protection. Even then, only red diesel that has been purchased before 10 June 2021 may be used for such purposes.
Are the financial implications for construction companies significant?
As red diesel use was widespread in the construction industry, the ban on its use is being keenly felt. Before the rule change, the Civil Engineering Contractors Association predicted firms faced up to £500m in extra costs.
A straight switch from red to white diesel is 46.81 pence extra per litre used — five times as much duty as before. One-off costs to stay compliant also need to be factored in, including additional tanks, vehicles or equipment, and tank and site security.
Does the rule change increase the risk of fuel theft?
Supply chain issues, perceived shortages, legislation changes, price increases and red diesel reform are all contributing to the recent rise in fuel theft affecting many industries. With more sites now storing larger volumes of undyed, higher-priced road diesel, fuel is even more attractive to thieves.
Stepping up tank and site security is therefore imperative, from installing smart tanks to using telemetry systems.
Are the rules the same for all of the UK?
The Isle of Man and Isle of Wight are subject to the same tax rule changes as mainland Britain, but there is no change in the Channel Islands. In Northern Ireland, private pleasure craft is no longer be permitted to use red diesel.
Are there cleaner alternative fuels to diesel?
A growing variety of cleaner fuels are available as drop-in alternatives to diesel, including GTL Fuel and HVO (dependent on usage, duty may still apply).
Are there any products I can use to help deter fuel-theft?
Diesel Defender is an easy-to-implement solution that can help to deter fuel theft of non-rebated fuel and prevent financial loss. The liquid blue marker dye colours white diesel, also known as road diesel or DERV, to produce a green fuel, making it distinguishable from diesel purchased for personal use. It acts as a powerful deterrent to thieves as it improves fuel traceability, impacts resale value, and exposes non-commercial use.
Looking for personalised advice on how red diesel duty equalisation might affect your business? Get in touch.
