Reform of red diesel (gas oil) and other rebated fuels entitlement

Finance & Banking Finance & Banking: In The News
1

Who is likely to be affected:-

Businesses and individuals currently entitled to supply or use rebated gas oil (red diesel) and rebated biofuels.

This will have serious knock-on effects that will impact on many of us:point_down:

Who is likely to be affected

Businesses and individuals currently entitled to supply or use rebated gas oil (red diesel) and rebated biofuels.

General description of the measure

This measure introduces legislative changes through Finance Bill 2021 and subsequent secondary legislation to restrict the entitlement to use red diesel and rebated biofuels from April 2022 to the following qualifying purposes:

  • 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 non-commercial premises - this includes the heating of homes and buildings such as places of worship, hospitals and townhalls; off-grid power generation; and non-propulsion uses on permanently-moored houseboats
  • for maintaining community amateur sports clubs as well as golf courses (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 (including caravans) of travelling fairs and circuses

The measure will also extend fuel duty to biodiesel, bioblends and fuel substitutes used in heating, applying the rebated duty rate to non-commercial heating and the full rate of duty to commercial heating. Consequential changes to covering penalties for contravening restrictions on the use of rebated fuels will also be made. The legislation will provide for secondary legislation to enable HMRC to disapply its powers to seize vehicles or other machinery in certain circumstances.

Registered fuel suppliers that switch a fuel tank from red to white diesel will need to flush out the tank and supply lines until no trace of marked rebated fuel remains. This will help to ensure compliance and minimise the risk that white diesel that has had the full duty rate paid on it is contaminated with the red diesel marker.

Reform of red diesel and other rebated fuels entitlement - GOV.UK (www.gov.uk)

2

Typical unhelpful government advice, that causes more confusion than clarity.

Looking around I found a readable article in Construction news.

What is changing?

From 1 April 2022 it will be illegal to put red diesel into vehicle and machinery fuel tanks in the UK, except in very limited and specific circumstances.

Red diesel is essentially the same as regular white diesel but dyed to indicate its intended use is off-road. When used in road vehicles, diesel is subject to a duty of almost 58 pence per litre (ppl), which the government says reflects its “harmful impact”.

But the same substance, when used for other means, is taxed at the far lower rate of 11pence per litre. .Hence, it is given a red colouring, to allow tax authorities to track it and crack down on misuse. Now ministers want to further restrict the legal use of rebated diesel.

Build UK says traces of red diesel will be accepted in storage tanks but that fuel tanks must be flushed of the cheaper substance if a machine is switched from accepted to unaccepted use.

Although it has promised a pragmatic enforcement approach, HMRC is clearly motivated to crack down on unjustified use of rebated fuel. It has the powers to levy a penalty equal to the duty avoided, issue fines of up to ÂŁ250 and ultimately seize the offending piece of machinery, which could be by far the biggest hit for contractors.

1 Like
3

It’s causing all sorts of problems for my son-in-law’s company as he has several multi use vehicles that up until now were fully legal with gas oil. His relations are also in a quandary as they own and run fairground amusements etc … its a ruddy nightmare!
These new rulings will have a big impact on the price of many things and cause all sorts of problems trying to get it right🤬

4

I have always thought that red diesel was a ludicrous system. Here businesses just claim Fuel Tax credits for the excise tax imposed on fuel.

It was also a shock to discover than in the UK it is actually illegal to make your own diesel fuel from sources of oil ie the local chippie

5

I used to know someone who worked for HMRC tracking down illegal red diesel use and doing roadside spot checks

And that trick with cat litter, it will take out the red colour, but still leaves some marker, so they still get nicked! Just saying …… :rofl: