Red diesel duty changes FAQs – Are you ready?

The countdown is on to the red diesel duty equalisation changes which come into force on 1st April 2022. Are you ready?

If the answer is no, or you’re not sure, don’t worry. We are here to help.

This is the biggest change that the fuel industry has seen in decades, and we are committed to supporting our customers with the transition. Here, we have answered the most frequently asked questions about the upcoming changes to bring you up to speed.

Where can I find all permitted and non-permitted usages of red diesel after April 2022?

Quick answer: Please refer to the latest UK government guidelines which can be found here.

From April 2022 red diesel usage is 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 will 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?

Quick answer: No.

Red diesel rule changes do not apply to machinery types, but to specific use or application. Equipment will still be able to 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 after April 2022. Supplies of both red and white diesel will 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 after April 2022 for non-commercial purposes?

Quick answer: Yes.
Public sector bodies will be able to use rebated fuel for heating and electricity generation, if the premises is used for non-commercial purpose. Any use of red diesel for commercial gain will no longer be permitted, including construction work, private waste management and ground maintenance. Public sector bodies that use fuel for both commercial and non-commercial purposes must keep their stores of rebated and duty paid fuels separate.

Will industrial heating oil and kerosene continue to receive a duty rebate from April 2022?

Quick answer: Yes.

Both industrial heating oil and kerosene will continue to 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 following the rule change?

Quick answer: Yes, but only in exceptional circumstances.

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 will only be provided in exceptional circumstances.

Can special licence holders still benefit from rebated rates on red diesel?

Quick answer: No.

If HMRC approves a license, the licence holder will still need to pay the difference in duty on the remaining red diesel, so rate relief will not apply.

Will I be able to use up the remaining red diesel in the tank of my machine after April 2022?

Quick answer: Yes.
If red diesel is still sitting in the tank of a machine or vehicle that is no longer permitted after April 2022, it CAN be used up until the tank is empty—if the same tank is not refilled with red diesel again.

Can I sell my remaining red diesel stores?

Quick answer: Yes.

Stores of red diesel can be sold or given away, either to someone who is allowed to use it, or to any Registered Dealer in Controlled Oil (RDCO). Otherwise, red diesel held in external storage tanks must be disposed of via an approved waste oil recycling or disposal company.

Will the government check red diesel stocks after April 2022?

Quick answer: Yes.

Spot checks are likely and rule breakers risk significant fines. The government relaxed initial rules around tank flushing, meaning red diesel will not have to be flushed out of tanks and lines once supply has been 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?

Quick answer: No.

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 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?

Quick answer: Yes – in certain circumstances.

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 or plough matches?

Quick answer: Yes to plough matches – no to tractor runs.

As agricultural shows and ploughing matches provide information and education that benefits agricultural purposes, the government considers that running or participating in these activities are purposes relating to agriculture. HMRC has stated previously that tractor runs do not qualify for red diesel use.

Can I use the same equipment for agricultural purposes and non-permitted use?

Quick answer: Yes but not the same fuel.

To use the same equipment for non-permitted use after agricultural use, farmers will need to drain and flush out the diesel tank to remove traces of rebated fuels.

I work in the transport industry – could my business be affected by the changes?

Quick answer: Yes.

Though white diesel is widely used in haulage, the changes will impact the industry. After April 2022, red diesel will 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.

Will there be financial implications for my construction company?

Quick answer: Yes.

All heavy construction equipment, on-site commercial heating and power generation will no longer be permitted to run on red diesel from April.
A straight switch from red to white diesel be 46.81 pence extra per litre used — five times as much duty as before. One-off costs to stay compliant may also need to be factored in, including red diesel removal, additional tanks, vehicles or equipment.
Another important consideration is that white diesel is more attractive to thieves, as it doesn’t contain the tell-tale red dye, so tank and site security is imperative, from smart tanks to telemetry systems.

Are the rules the same for all of the UK?

Quick answer: No.

The Isle of Man and Isle of Wight are subject to the same tax rule changes as mainland Britain, but there will be no change in the Channel Islands. In Northern Ireland, private pleasure craft will be no longer be permitted to use red diesel after the deadline.

Are there cleaner alternative fuels to diesel?

Quick answer: Yes.

A growing variety of cleaner fuels are available as drop-in alternatives to diesel, including Shell GTL Fuel and HVO (dependent on usage, duty may still apply).

Looking for personalised advice on how red diesel duty equalisation might affect your business? Get in touch.

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