Why is Red Diesel Tax Changing from 1st April 2022?
Posted on 11th May 2021
The government is making changes to red diesel (off-road diesel) taxation. From 1st April 2022 it is removing tax relief for red diesel for several industries – effectively a ban on red diesel for many of its current users. Therefore, from April 2022, the entitlement to use red diesel and rebated fuels will be far more restrictive than the current rules.
At Crown Oil, we have a range of alternative fuel options available as well as support for storage and tank flushing arrangements. We can clean your tank and uplift any rebated fuel to ensure you’re compliant before 1st April 2022.
Call 0330 123 1444 to take advantage of low red diesel rates. We can buy back your fuel and replace it with compliant fuel while the market is strong.
Which industries will be affected by red diesel changes?
There are many industries which are set to lose out and will no longer be able to use red diesel as a rebated fuel from 1st April 2022. This will unfortunately mean that they will have to revert to using alternative fuels such as regular DERV fuel or newer fossil free fuels such as HVO fuel.
Industries and uses exempt from the changes to red diesel taxation include:
- Agriculture, horticulture, forestry and fish farming (this allows vehicles used for agriculture to be used for cutting verges and hedges, snow clearance and gritting roads)
- Rail including passenger, freight and maintenance vehicles that run on rail tracks
- Non-commercial heating and electricity generation (such as off-the-grid homes, places of worship and townhalls)
- Non-commercial power generation (such as hospitals and off-the-grid households)
- Commercial boating industry (including fishing and inland water freight industries and passenger ferries)
- Off-grid power generation; and non-propulsion uses on permanently-moored houseboats
- Travelling funfairs and circuses (for powering the machinery (including caravans))
- Amateur sports clubs and golf courses (including activities such as ground maintenance, and the heating and lighting of clubhouses, changing rooms etc.)
Industries that will no longer be able to take advantage of red diesel include:
- 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)
If your sector is not included or you’re unclear whether your business is exempt, contact Crown Oil (0330 123 1444) or check with your local HMRC office. Further information is available on the HMRC website. Now is the best time to replace existing fuel stocks while the red diesel market remains strong.
What is red diesel?
Red diesel, also commonly known as gas oil and agricultural diesel is standard diesel that has been dyed with a red marker to signify its low duty rate. Because of this low rate, it’s illegal to use red diesel in road vehicles and must only be used in untaxed off-road vehicles, such as in agricultural, industrial and construction machinery.
Why is red diesel tax changing?
Red diesel currently accounts for around 15% of all diesel consumption in the UK and produces nearly 14 million tonnes of CO2 every year.
The change in red diesel tax will require many industries to use fuel that’s taxed at the standard rate for white diesel and therefore encourages businesses to use alternative fuels to help reduce their environmental impact.
What does the change in red diesel duty mean for your business?
This depends entirely on your industry and what application you use red diesel in. If your sector is included in the above list, then you can continue using red diesel after 1st April 2022.
This change in red diesel duty will mean huge cost increases. Marked red diesel attracts a fuel duty rate of 11.14 pence per litre (ppl) which is included in the price of red diesel that businesses pay. These businesses instead will need to switch to regular white diesel which has a duty rate of 57.95 per litre (an increase of 46.81 pence per litre). Or alternative fuels such as Hydrotreated Vegetable Oil (HVO).
Penalties for breaking restrictions on the use of rebated fuels will also change, allowing HMRC to seize vehicles and other machinery in certain circumstances.
Now is the time to switch to HVO fuel
We’ve invested heavily in alternative fuels such as HVO fuel to help businesses reduce their environmental impact while ensuring performance is not impacted. While we’ve seen a 100% uptake in the last year, the current cost of these alternatives can hinder some industries’ use.
We understand the frustrations felt by businesses and hope the government begins to put its weight behind the wider rollout and use of greener fuels such as HVO. We hope the UK government and other G7 leaders consider alternative fuels as a viable solution to tackling global warming.
Find out about our sustainable fuel stations and HVO trials and call us on 0330 123 1444 today
Do you use red diesel for heating?
Switching to Industrial Heating Oil (IHO) can help you save money and prevent the price increases associated with the red diesel tax changes.
IHO is not affected by the change in red diesel duty as it doesn’t need to meet the exacting standards for use in off-road commercial heating applications, allowing businesses to see huge savings.
Find out more about our IHO commercial heating fuel and call 0330 123 1444 today.
Red diesel use for sailing vessels after April 2022
A big U-turn in the Chancellor’s announcement was that sailors and boaters will continue to be permitted to use red diesel in their sailing vessels after April 2022, a change in policy from Budget 2021.
Last year, the government planned to remove the subsidy on red diesel from 2022, with the exception of heating onboard. However, private pleasure craft can now continue to use red diesel and pay their fuel supplier the difference between the red and white diesel rate on the proportion used for propulsion.
Crown Oil can help!
Crown Oil can bridge that gap during your energy transition and manage all aspects of your tank safety to ensure it’s compliant including the removal and buy back of your rebated fuel. We can offer the full solution for your changeover, providing full consultancy and support throughout. Call 0330 123 1444 to find out more.
What else was discussed during the March Budget 2021?
Fuel duty rates frozen
As anticipated, the Chancellor revealed in his 2021 Budget that fuel duty will be frozen once again, for the 11th consecutive year, from the 2021 to 2022 financial year. This is a measure designed to support businesses and families during the pandemic.
Rather than increasing with inflation, fuel duty has been frozen for over a decade which is a huge tax cut for motorists, costing the government over £10billion a year in continuing the duty freeze. The tax imposed on petrol and diesel sales has remained at 58ppl plus vat since 2011.
Following the pandemic, the public’s reliance on cars for a safe means of travel for essential journeys outweighed the increasing pressure to lower carbon emissions. Raising the already high fuel duty could risk damaging the economy even more from increased consumer and business costs.
Potential fuel duty rises are set to be considered within the government’s plans to achieve net zero emissions by 2050. This comes from arguments that the move could hinder road transport’s low carbon transition.
UK fuel prices on the rise
Rising barrel oil prices have led to an upsurge in prices at the pump for four sequential months, comprising a 3ppl increase in February, says RAC Fuel Watch. In February, oil rocketed by $10 per barrel to $65.83, a price not observed since mid-January 2020. At the time of writing, a barrel of oil is $29 more than it was at the start of November.
Consequently, filling up the average fuel tank is currently more than £1.70 more expensive than the start of the month and £5 more expensive than the end of 2020.
At the end of February, motorists paid an average of 123.38p for petrol, up from 120.22p at the beginning of the month. Diesel is also up to an average of 126.47p, increasing from 123.35p on 1st February. This means fuel duty currently accounts for 47% of each litre of petrol and 46% for diesel.
Green power and transport
The Chancellor revealed an initial £12 billion in grants and another £10 billion of government guarantees for the UK Infrastructure Bank to help private companies “green up” their infrastructure.
While recent government announcements have revealed electric vehicles are the favoured route to reduce harmful emissions, the budget surprisingly left out the minutiae of future investment plans to help the government reach its net-zero target, such as additional investment in electric vehicle battery manufacturing and the UK’s EV charging infrastructure, that currently relies on fossil fuels.
Corporation tax to increase to 25% in 2023
The Chancellor also announced that corporation tax will be increased to 25% in 2023. Profitable businesses and big earners such as construction firms will be hit the hardest, with only 10% of firms currently set to pay the new higher rate.
Corporation tax rates will be tiered for the first time and those firms that make an annual profit of £50,000 or less will continue to pay the current 19% rate. Rates will then be tapered between £50,001 and £250,000 profits so that only those companies making over £250,000 will pay the new 25% rate from 2023.
More optimistically, a new ‘super-deduction’ scheme will be introduced from 1 April 2021 until 31 March 2023 which will allow companies that invest in new plant and machinery to benefit from a 130% first year capital allowance.
With this ‘super-deduction’, firms can obtain tax credits in the year they invest, so companies are advised to delay investment until April 2021 when the ‘super-deduction’ launches. This move also encourages companies to refresh their equipment to cleaner, more efficient alternatives during the two years from 1 April.
However, it must be noted that the ‘super-deduction’ is available to companies only and does not include those businesses that operate as sole traders or partnerships. It’s estimated that only 10-15% of farms operate their main business as a company. The National Farmers Union President Minette Batters said they are “disappointed that the ‘super-deduction’ on machinery investment is only applicable to limited companies and not available to all businesses, especially when significant investment in new farm technology is required.”
How can Crown Oil help with the red diesel tax change? We can buy back your fuel!
As the deadline approaches, red diesel values are dropping by as much as 10% every month. Swap your fuel stocks now to ensure you get the maximum return for your unusable assets. We can collect and buy back your rebated fuel, so you can sell at the best possible price before rates plummet further.
We can handle all of your fuel swap to ensure your tank is compliant:
- Fuel uplift of rebated stock
- Buyback rebated fuel
- Tank clean if required
- NDT tank inspection if over 10 years old
- HVO fuel supplied at competitive rates with excellent credit terms available
To find out more about our bulk fuel delivery service and our wide range of alternative fuels, call our fuel experts today on 0330 123 1444 to discuss how you can prepare for the upcoming changes and what you may need to do.