Red diesel and the April 2022 changes

What is red diesel?

Also known as rebated fuel, red diesel is chemically marked and dyed gas oil (diesel); dyed to allow law enforcement agencies to identify it. Red diesel is entitled to fuel duty rate – hence rebated fuel, and the dye acts as a deterrent to potential fuel fraud.

Why the changes to red diesel entitlements?

In the 2020 Budget, the government announced that it was removing the entitlement to use red diesel from most sectors, except for agriculture (as well as horticulture, forestry and fish farming), rail and non-commercial heating, from 1 April 2022 to help meet its climate change and air quality targets.

The tax changes are to ensure that most users of red diesel use fuel taxed at the standard rate for diesel, like motorists, to more fairly reflect the harmful impact of the emissions they produce. Removing most red diesel entitlements will also help to ensure that the tax system incentivises users of polluting fuels to improve the energy efficiency of their vehicles and machinery, invest in cleaner alternatives, or just use less fuel.

What specifically changed with red diesel on 1 April 2022?

For those no longer able to use rebated fuel, who cannot change to a cleaner alternative, diesel or biofuel for which the full rate of fuel duty has been paid must be used.

The rebated fuels affected by these changes are:

  • rebated diesel
  • rebated Hydrotreated Vegetable Oil ()
  • rebated biodiesel and bioblend
  • kerosene taxed at the rebated diesel rate
  • fuel substitutes

Can I still use red diesel?

You will be able to use rebated fuel in vehicles, machines and appliances for accepted uses if you’re in any of the following sectors:

  • agriculture
  • horticulture
  • fish farming
  • forestry

You can use rebated fuel to propel and stop a vehicle designed to run on a railway, but not on a tramway.

You can use rebated fuel for electricity generation and heating for premises that are not used for commercial purposes.

You can use rebated fuel in agricultural vehicles and unlicensed vehicles kept and used on:

  • land maintained by a club that is registered with HMRC as a community amateur sports club
  • a golf course
  • a golf driving range

 

You can use rebated fuel in all types of boat, except for private pleasure craft in Northern Ireland. This includes in their engines and in other machines and appliances permanently on the boat.

You can use rebated fuel in machines and appliances to:

  • power rides
  • provide electricity and heating for caravan accommodation in relation to travelling fairs and travelling circuses

These are significant changes to the use of red diesel that have a direct impact on many businesses.

The most comprehensive information about all the changes in red diesel/rebated fuel and how they may affect your specific business and specific circumstances can be found at  https://www.gov.uk/government/publications/changes-to-rebated-fuels-entitlement-from-1-april-2022/check-when-rebated-fuel-can-be-used