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The measure will come into force from 1 April 2022

In brief . . .

The UK is set to get greener.

The UK is set to get greener.

The reform of red diesel entitlement affects our customers who supply or use rebated gas oil (red diesel) and rebated biofuels. Subsequent restrictions to red diesel and rebated biofuels are expected to take place from April 2022. The reformative measures extend fuel duty to biodiesel, bioblends and fuel substitutes used in heating. However, the rebated duty rate will apply to non-commercial heating and the full rate to commercial heating. Penalties for flouting restrictions of rebated fuels are expected. For example, secondary legislation could enable HMRC to seize vehicles or other machinery.

Take note:

Registered fuel suppliers, beware! If you switch a fuel tank from red to white diesel, you will need to flush out the tank and supply lines until no trace of marked rebated fuel remains. Doing so will help ensure that you and/or your business is compliant with the new legislation. It will also minimise the risk that white diesel – that has had the full duty rate paid on it – is not contaminated by red diesel marker.

What is exempt from the changes to red diesel legislation?

This measure introduces legislative changes through Finance Bill 2021.

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Why is a reform of red diesel entitlement happening?

This measure introduces legislative changes through Finance Bill 2021.

June 2019

With air pollution being one of the bigger continual threats to public health, the UK government had to act. Eager to shift the tide, they launched an ambitious new strategy to go green and save lives. In doing so, the UK became the world’s first major economy to pass laws guaranteeing an end to its contribution to global warming by 2050. Under the new target, the UK aims to bring all greenhouse gas emissions to net zero by 2050. Previously, the UK had aimed for a minimum 80% reduction compared to the levels found in 1990.

Why is red diesel such a big deal?

Accounting for around 15% of all diesel used in the UK, red diesel is responsible for nearly 14 million tonnes of carbon dioxide a year. Red diesel is mainly used for off-road purposes. This can include powering bulldozers and cranes used in the construction industry or power drills for oil extraction. In London 2018, pollution concerns arose surrounding the construction and infrastructure building sectors. These specific sectors were estimated to have caused 7% of nitrogen oxide emissions and 8% of PM10 emissions (a type of particulate matter).

Budget 2020

With these findings in mind, the government sought to meet its climate change and air quality targets. To fulfil this, tax changes would incentivise users of polluting fuels – like diesel – to improve their energy efficiency. Effective April 2022, entitlement to use red diesel would be removed and rebated biodiesel from most sectors. Cleaner alternatives for vehicles and machinery should be found, or users should simply use less fuel. Going forward, tax changes for red diesel more fairly reflect the harmful impact of the produced emissions.

Locators’ Energy & Carbon Saving Initiatives

Looking to the future after 10 years of lifting green standards

As a business – and as individuals – Locators is committed to minimising our environmental impact. Over the last 10 years, we are proud to have implemented numerous eco-friendly initiatives. Our team is committed to combating climate change. We want to help make the UK a cleaner place – but we know this simply won’t happen overnight. To contribute this ongoing process, we have formulated initiatives to pursue this goal.

How has the reform of red diesel entitlement come about?

Historically, fuel duty was intended to be a tax on road vehicles

Motor and heating fuels are liable to fuel duty, with only fuel taxed at the full rate of fuel duty allowed to be used in road vehicles. Some oils and fuels are taxed at a lower (rebated) rate – historically because fuel duty was intended to be a tax on road vehicles. This includes gas oil (diesel), which is chemically marked and dyed to enable law enforcement agencies to identify it as rebated fuel. This provides a deterrent to fuel fraud as they can detect when the wrong sort of diesel is being used. The colour of the dye means this fuel is called ‘red diesel’. Gas oil intended for use in diesel engine road vehicles, otherwise known as ‘white diesel’ (because it has no marker or dye), has a fuel duty rate of 57.95 pence per litre (ppl). Red diesel is entitled to a rebate of 46.81ppl, giving it an effective duty rate of 11.14ppl.
Duty Paid Now

Red diesel= 11.14 pence per litre
White diesel = 57.95 pence per litre

Budget 2020

The government announced the removal of entitlement to use red diesel from most sectors. This would come into effect from 1 April 2022, with the exception of:

🟪 | The agricultural sector
🟪 | The forestry industry
🟪 | The fish farming industry
🟪 | The horticultural sector
🟪 | Non-commercial heating
🟪 | The rail industry

To ensure they had not overlooked any exceptional reasons, the government consulted last summer. They reconvened to examine the case for whether other sectors should be allowed to continue using red diesel. The outcome of which, was set out in the summary of responses to the consultation and published alongside Budget 2021.

Budget 2021

The government announced its decision not to change the treatment of private pleasure craft in Great Britain. Private pleasure crafts will continue to use red diesel and pay their fuel supplier the difference. The difference would be between the red diesel rate and the white diesel and the proportion they intend to use for propulsion.

Operative Date

The measure will come into force from 1 April 2022.