Red Diesel Reform and what it means for your business
The rules are changing around the use of red diesel, as of 1st April 2022.
The UK became the first major economy in the world to pass laws guaranteeing an end to its contribution to global warming by 2050. The aim is to get all the UK’s greenhouse emissions to net zero by 2050. This is all part of their strategy to ‘clean up the air and save lives’ due to air pollution continuing to be one of the biggest threats to public health.
In the 2020 Budget, the UK government announced that rebate gas oil (red diesel) and rebated biofuels are to be banned to help combat climate change and to meet air quality targets.
Under the new legislation, (which was introduced in the 2021 Finance Bill) the allowed uses for rebated fuels will be significantly reduced as of 1 April 2022. It will soon become illegal to put rebated fuel into a machine for uses which fall outside the criteria of the new rules. Operators using rebated fuels will need to ensure that any red diesel in their current machinery or storage containers are used by the 1st April deadline. Anyone caught using it illegally can be reported to HMRC. The reform will provide for secondary legislation which will enable HMRC to disapply its power to seize vehicles / machinery if caught using it illegally.
The permitted uses for red diesel will be restricted to equipment in certain use cases such as:
- Fish farming
- Fuel used for non-commercial purposes
- Rail transport
- Sailing, boating and marine transport
- Community amateur sports clubs and golf courses
- Travelling fairs and circuses
The equipment permitted to use rebated fuels for agriculture includes:
- Works trucks, e.g. road licensed forklift
- Non-road mobile machinery e.g. unlicensed forklift
Accepted purposes are specified in Excise Notice 75, clause 9, and include:
- Rearing of animals for production of food, wool, etc
- Growing and harvesting crops, ornamental plants, timber, etc
- Purposes relating to sport or recreation
- Construction of structures/buildings for purposes relating to agriculture
- Transportation of produce, inputs or waste, except in specified circumstances
- Equipment used for permitted purposes e.g. agriculture, horticulture, fish farming or forestry, can be used for other purposes on private land in which it is usually kept.
- You can use rebated to travel to and from the place in which the vehicle is used. This includes going on the public highway as long as the vehicle is licensed.
In summary, red diesel can still be legally used by specific off-road vehicles such as tractors and farm machinery. However, use in a regular vehicle on a public road is illegal. This is because it does not adhere to the normal fuel duty. Those who are no longer permitted to use rebated fuels will need to use up any red diesel in their machinery and storage tanks by 1st April. Furthermore, if storage tanks are owned or controlled by an RDCO (Registered Dealer in Controlled Oil) they must be flushed of any trace of rebated fuels before 01/04/2022. This is to make way for permitted fuels such as diesels or biofuels, in which full excise duty is paid e.g. white diesel.