The entitlement to use red or rebated diesel is changing

As part of the UK’s commitment to reduce its contribution to global warming, the government has reviewed the use of red or rebated fuel

A recent government report on the use of red diesel [link below] states that the ‘use of red diesel accounts for around 15 per cent of all the diesel used in the UK and contributes to nearly 14 million tonnes of carbon dioxide a year’. It also identifies diesel is one of the most polluting fuels, and those currently entitled to use it pay a lower duty than white diesel, and therefore pay less for the harmful emissions they produce.

Red diesel is currently used in a number of sectors, predominately off road, including construction, agriculture and airfield maintenance.

In the 2020 budget, there was an outline to remove the use of red diesel use for most sectors from April 1 2022. The mechanism to implement this change has been the Finance Bill 2021 and subsequent subordinate legislation.

The removal of entitlement for use of red diesel affects most sectors except the agricultural sector (as well as forestry, horticulture and fish farming). These are defined in the HM Revenue and Customs (HMRC) Fuels for use in vehicles (Excise Notice 75)

Regarding fuels for use in vehicles within the agricultural sector, those used in landscaping and the maintenance of recreational facilities ‘are not’ considered as an accepted activity of falling within the government’s definitions within the Memorandum of Agreement section 9.

There are some cases however, where the use of rebated diesel and biofuels in vehicles and machines used on land maintained by a community amateur sports club (CASC) or a golf course or golf driving range will be permitted after April 1 2022, however this does not always extend to the use of the vehicle on the public highway where full duty or white fuel must be used.

Meeting compliance

According to government compliance definitions, the users of vehicles and machinery that are losing red diesel entitlement must not stock up on red diesel and run-down existing stocks in the lead up to the April 1 2022 deadline, illegal fuel use will be liable for forfeiture and penalties.

End users will not have to flush out the tanks of their vehicles or machinery during the transition, as it is the potential impact on the environment from incorrect procedures and disposal being of high concern as well as the cost of doing so.

Some of the vehicles and machinery currently entitled to use red diesel until the 2022 deadline, may be seldom used so it may not be possible to empty the tanks and change to white diesel prior to the deadline date and traces may be evident.

HMRC will be offering guidance to assist with the changes, and record keeping will be a key to providing evidence for compliance. This includes keeping invoices and receipts showing the dates of red diesel purchased prior to the deadline date and the purchasing of white diesel after this date to show the transition. HMRC officers will “consider the type of machinery and the frequency of use in deciding whether detected traces are at a level consistent with compliance with the new rules.” I would suggest the use of fuel cards, to aid in collating the evidence.

Preparation

Theft of fuel is an ongoing issue, and this could increase with the changeover to white fuel., The storage and security of vehicles and equipment should be considered along with the protection of the more valuable fuel.

The future

With a drive towards electric and more environmentally-friendly fuels it won’t be long before vehicles and machinery relying on diesel will be phased out, based on the increased cost to run and more viable options becoming available, which will suit the inevitable change, meet the UK governments commitment and reduce our contribution to global warming.

CTA?

The government report on red diesel can be viewed via this link: (https://www.gov.uk/government/publications/reform-of-red-diesel-entitlements/reform-of-red-diesel-and-other-rebated-fuels-entitlement)

CASC club guidance via this link: https://www.gov.uk/government/publications/community-amateur-sports-clubs-detailed-guidance-notes/community-amateur-sports-clubs-detailed-guidance-notes

The definitions that HMRC applies to agriculture, horticulture and forestry can be found here: https://www.gov.uk/guidance/fuels-for-use-in-vehicles-excise-notice-75#exc-vehicles