In the March 2021 budget, the Government confirmed forthcoming changes to red diesel taxation. From 1st April 2022, rebated diesel (known as red diesel) and rebated biofuels will no longer be allowed to be used as they are currently.

What Is Red Diesel?

Also known as gas oil, off-road diesel or tractor diesel, red-diesel is a fuel intended to operate registered off-road vehicles and machinery and is therefore taxed at a lower rate. Due to the rebated duty rate, they are legal requirements about when and how it can be used, which is why it is dyed red to help identify illegal use.

What Are The Changes To Red Diesel?

From the 1st of April 2022 onwards, fuel distributors will only be able to supply red diesel for the following applications:

• for vehicles and machinery used in agriculture, horticulture, fish farming and forestry. This includes allowing vehicles used for agriculture to be used for cutting verges and hedges, snow clearance and gritting roads

• to propel passenger, freight or maintenance vehicles designed to run on rail tracks

• for heating and electricity generation in premises used for non-commercial purposes. This includes: the heating of homes and buildings such as places of worship, hospitals and town halls; and electricity generation for homes and other premises being used for non-commercial purposes

• for maintaining golf courses and community amateur sports clubs (including activities such as ground maintenance, and the heating and lighting of clubhouses, changing rooms etc)

• as fuel for all marine craft refuelling and operating in the UK (including fishing and water freight industries), except for propelling private pleasure craft in Northern Ireland

• for powering the machinery of travelling fairs and travelling circuses (including providing heat and electricity for caravans used by them)

What Does This Duty Change Mean For Your Business?

The exact implications this will have on your business depends on your industry and which application you are using red diesel for. If you are included in the above list of qualifying uses, you don’t need to worry. You can still continue to order red diesel after the changes are in place.

Sectors and applications that don’t fall into the above categories – which includes construction and manufacturing customers, as well as a number of transport and logistics use – will no longer be able to purchase or use red diesel from 1st April 2022. For these businesses, the new changes will mean significant cost increases by switching to regular white diesel, also known as DERV.

Government advice is that users of vehicles and machinery losing their red diesel eligibility must ensure they run down their existing stocks before 1st April 2022. There will be no “grace period” to allow businesses to use up their remaining red diesel past this date. The government has implied the likelihood of on-site spot checks and fines issued for non-compliance.

Users may also have to flush out their existing tank when switching to white diesel leaving no trace of rebated fuel by the change date.

Why Can Construction No Longer Use Red Diesel?

Many red diesel users will lose their eligibility to use the rebated fuel. This is part of the government’s efforts to meet climate targets and reduce carbon. With taxing most users at the standard rate this is hoped to reflect on the impact of emissions by promoting energy efficiency and the use of greener fuel alternatives such as HVO Fuel.

Is Now The Time To Switch To HVO?

If your business has lost the eligibility to use tax rebated fuel there is still time to explore alternatives.

HVO fuel (Hydrotreated Vegetable Oil) is a form of renewable fuel that has been produced from renewable and sustainably sourced vegetable fats and oils. HVO uses hydrogen as the catalyst, which is what distinguishes HVO from biodiesel. This makes it a more clean-burning, environmentally-friendly renewable direct drop-in diesel alternative, without the short shelf life of regular biodiesel.

You can use HVO in any diesel engine without requiring any changes. Manufacturers have approved the fuel and identified there is no degradation in performance.

For more in-depth information on the forthcoming changes visit the official GOV documents linked below:

Check when rebated fuel can be used

How to prepare for the changes to rebated fuel if you’re a fuel user

How to prepare for the changes to rebated fuel if you're a registered dealer or producer of biofuels

UKIFDA Industry Guidance - Red Diesel Changes

Bilslands is here to support your business through the transformation from red diesel. If you have any questions or queries regarding the change don’t hesitate to contact us.