If you haven’t yet heard, a huge change in longstanding laws surrounding taxation of diesel is coming in just over a week! These new regulations will involve sweeping changes in who is allowed to access red diesel, with many industries being prohibited from legally using the rebated fuel. Red diesel is a term for diesel earmarked for off-road use, in construction, agriculture, or other industrial applications. The diesel is dyed red to differentiate it from regular on-road, or ‘white’ diesel. This dye also serves to stain the inside of engines, allowing police to identify car users illegally accessing the fuel.
Red diesel was initially subjected to a tax rebate as a concession for industrial use, as fuel duty was primarily intended to function as a tax on individual road vehicle users, not construction companies or other largescale users of diesel. At present, white diesel for road vehicles is subjected to a tax of 57.95 pence per litre, but red diesel buyers benefit from a rebate of 46.81 pence per litre, essentially offering a tax reduction of over 80%. For a decade, there has been a freeze on raising red diesel fuel duty, but now with the government setting net zero in their sights due to environmental concerns, this 10-year freeze is set to come to an end.
With climate change becoming a global focus and initiatives like net zero laid out to attempt to bring carbon emissions under control, it is the hope of the government that removing access to rebated fuels will encourage these industries to swap to greener, eco-friendly alternatives. This move will most significantly affect the construction industry, but all industrial users of diesel will be impacted, except for those specifically listed under the government’s new exemption laws. Exempt industries will still be allowed to access red diesel, including:
- Agriculture and Horticulture
- Non-Commercial Heating and Power Generation
- Public Sector Usage
The full list can be viewed on the government website, along with the background, policy objective, and economic impact of their proposed changes. These new regulations come into effect on the 1st of April, so if this will impact your business, make sure you’re prepared for the switch!