Red diesel: are you complying with the 2022 reforms?

Red diesel can be used only for specific purposes. There are severe consequences for unauthorised use, including seizure of vehicles and machines, an assessment to tax, and prosecution leading to a fine and/or imprisonment.

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Dale Cambridge-Sharpe
Published: 22 Jun 2023 Updated: 22 Jun 2023
Business tax Tax

There were major changes to the way in which rebated “red” diesel (which is taxed at 10.18 pence per litre instead of the full rate at 52.95 pence per litre) could be used.  From 1 April 2022, the system moved from allowing most off-road vehicles to use red diesel to allowing only specific machines used for a qualifying purpose to use red diesel.

Sectors that have lost entitlement to red diesel use

This change mainly affected the following:

  • Airport operators.
  • Commercial generators.
  • Commercial heating.
  • Construction and road maintenance.
  • Electricity generators
  • Logistics and haulage (removal of use of red diesel to cool a refrigerated lorry).
  • Manufacturing such as ceramics, steel and timber.
  • Mining and quarrying.
  • Oil and gas extraction.
  • Plant hire.
  • Waste management.

Vehicles and machines operating in these sectors should now be using full duty paid “white” diesel currently taxed at 52.95 pence per litre.

Sectors that are entitled to continue to use red diesel

Sectors that can continue to use red diesel (for qualifying purposes) are:

  • agriculture;
  • horticulture, aquatic farming or forestry;
  • amateur sports clubs, golf courses or driving ranges; and
  • travelling fairs and circuses.

Private pleasure craft (boats) refuelling in Great Britain can also use red diesel but must pay the duty difference to their fuel supplier on the fuel they estimate will be used to propel their craft.  Private pleasure craft refuelling in Northern Ireland can only use red diesel for non-propulsion use (such as electricity generation and heating) if they have a separate fuel tank for this purpose.  If the private pleasure craft refuelling in Northern Ireland only has one tank for both propulsion and non-propulsion use, only white diesel can be used.

Non-qualifying uses of excepted machines

It is possible that an excepted machine may be used for multiple purposes, some of which do not qualify.  In this situation the sector the machine will operate in will be the starting point for determining whether or not red diesel can be used.

The most obvious example of an excepted machine used in different sectors and for different purposes is a digger.  When this is used for a qualifying purpose, for example digging a ditch on a farm to reduce the risk of arable land flooding, it can use red diesel.  If that digger is then used on a construction site, however, the fuel tank and whole system must be flushed to remove all traces of red diesel before switching uses.  The other legal alternative is to use white diesel when the digger is being used on a farm.

Likewise, tractors and farm vehicles can often find themselves being used for non-qualifying purposes, for example towing stuck cars from festival sites and being used for waste disposal purposes when picking up waste and spreading it on fields.  When these vehicles are being used for non-qualifying purposes, they also need the fuel tank and whole system to be flushed to remove all traces of red diesel beforehand.  This is a very expensive process.

What do I need to do if I cannot comply with the changes?

Special fuel duty permits are available to deal with circumstances that do not fit squarely with the law.  You may qualify for a permit to mix kerosene (a heating fuel) with petrol for use in vintage tractors.  Or you may qualify for a permit to use red diesel if you can prove that you cannot reasonably obtain white diesel.

If you have a permit, you would need to comply with the relevant conditions and record keeping requirements. You would also be required to pay the duty difference between the red diesel and the white diesel to ensure the correct duty has been paid on the fuel.

How can we help?

The new red diesel legislation is complex, and therefore it is easy to make a mistake. Evelyn Partners can help you ensure compliance with the new red diesel legislation or applications for special fuel duty permits by reviewing your current operations and assessing whether these comply with the law.

Approval code: NTAJ14062340

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication.

Tax legislation

Tax legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. You should always seek appropriate tax advice before making decisions. HMRC Tax Year 2023/24.