Red Diesel Tax is changing on the 01 April 2022
Red Diesel Tax is changing
Why is this happening and who does it affect?
In June 2019, the UK passed new laws to end its contribution to global warming by 2050 thus committing to reducing our emissions to net zero. Red Diesel is used mainly for off-road purposes, such as to power bulldozers and cranes used in the construction industry, or to power drills for oil extraction. The government identified that Red Diesel is responsible for the production of nearly 14 million tonnes of carbon dioxide a year and as such has legislated to reduce the use of Red Diesel significantly.
These changes will mean that most users of Red Diesel will have to pay more tax on their fuel by using road diesel. The government believes that this tax will incentivise these users to switch to more energy-efficient technologies, user greener alternatives, or use less fuel.
From 01 April 2022, the Government is changing who can use rebated gas oil (Red Diesel). To hit its 2050 goal, the government is reforming the “Red Diesel and other rebated fuels entitlement”. This change will affect businesses and individuals currently entitled to supply or use rebated gas oil (Red Diesel) and rebated biofuels.
From the 01 April 2022 the list of businesses and individuals who can continue to use Red Diesel are:
- 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 and 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
Please note that above list is a general guide.
The Government have provided a list of all the “excepted machines” that are entitled to use Red Diesel and their allowed purposes. To access and download this list please click the link below.
Alternatively, you can speak to your local HMRC Office or you can visit the reform-of-red-diesel-entitlements link below:
IMPORTANT!! Industries that won’t be able to use Red Diesel from 01 April 2022
You must not purchase and use Red Diesel from this date forward. You will be free to switch to White Diesel or you can seek alternative fuels. This is a general guide of the industries that won’t be able to use Red Diesel. If you require confirmation, please contact your local HMRC office directly.
- Construction and road maintenance
- Logistics and haulage (including refrigeration units)
- Mining and quarrying
- Oil and gas extraction
- Waste management
- Commercial heating
- Airport operations and ports
- Manufacturing (such as ceramics, timber and steel)
What will this change mean for those industries that are now not allowed to use Red Diesel?
Significant increase in price
Derv 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. This means for industries/sectors that are not on the approved list, the cost to run your vehicles/engines is going to increase significantly on the 01 April 2022 by 48.81ppl.
Annual usage per year Cost increase per year
- 5,000 litres £2340.5
- 10,000 litres £4681
- 100,000 litres £46,810
- 500,000 litres £234,050
On White Diesel, you also pay standard rate VAT at 20%.
What if I get it wrong?
The HMRC will be entitled to charge you an estimated value of the duty that you should have paid, impose fines/penalties and seize your vehicles or equipment.
Red Diesel contains a red dye that is added to the fuel so that it can stain the interior of engines, tanks and the pipework. This allows the HMRC to track and monitor the illegal use of Red Diesel. Whilst the Government has not provided official guidance to firms on how they transition from Red to White Diesel, they have asked that users do not flush out their old fuel from their tanks and systems in order to avoid creating accidental environmental damage.
What we advise you should to do next:
Do you use Red Diesel for heating then
switch to Superheat35
SuperHeat35 has been developed to offer conventional Gas Oil users a high quality, low cost alternative fuel to meet their heating needs.
It offers a significant savings over Gas Oil whilst providing equivalent calorific value, density and viscosity parameters. It can be used across a wide range of burner applications such as small package boilers, grain dryers, warm air heaters or rotary dryers used in mineral processing.
What are the benefits to switching Superheat35?
- High quality, low cost alternative product to GasOil, offering a comparative 8-10% saving
- Equivalent calorific value to gas oil
- Improves burner output performance
- Compatible as a drop in solution with your existing Gas Oil
- Certified to British Standard BS2869:2010
- A1:2011 by UKAS accredited laboratories
- Stored in dedicated tanks at HMRC approved warehouse
Consider going green and switch to HVO
HVO Renewable Diesel is a fossil-free diesel product made of 100% renewable raw materials, which does not release any new carbon dioxide into the atmosphere.
HVO is a drop-in alternative to fossil diesel, meeting EN 15940 standards and Fuel Quality Directive 2009/30/EC Annex II. There is no need to modify existing infrastructure. HVO is a greener renewable fuel with a chemical structure almost identical to regular diesel.
It has been certified as a sustainable fuel by the International Sustainability and Carbon Certification (ISCC) offering net greenhouse gas CO2reductions of up to 90%. It is also a non-toxic and non-carcinogenic.
Call you account manager about our HVO trials.
HVO Renewable Diesel
What are the benefits of HVO?
- HVO Diesel is the premium fossil-free alternative to Red Diesel/ gas oil which is made up of 100% renewable raw materials.
- FOSSIL FREE – a renewable and sustainable fuel
- Up to 90% lower greenhouse gas emissions
- Can be mixed with regular diesel
- Superior cold weather performance, down to -32 degrees
- Excellent storage features – does not lose quality
- Carbon offset delivery mileage
- High flashpoint - improved safety, storage and handling
Rix Petroleum are here to help you through this transition period
Rix are experienced in helping customers navigate the changing rules/regulations around using fuels. Thus, during this change period our dedicated team of local account managers are on hand to guide and help you make the best decisions for your business/operation.