Red Diesel Tax Changes – Is Your Sector Affected?

From April 1st 2022, there are new rules surrounding the use of rebated red diesel and rebated biofuels.

The new legislation is being introduced to help the UK achieve its 2050 net zero carbon target by decreasing commercial reliance on fossil fuels. A large number of sectors will no longer be able to burn fuels at a rebated rate and will instead have to use alternative fuels.

We’ve summarised the latest information from HMRC to help you understand what to do if you have leftover rebated fuel and how to manage the changes.

red diesel tax

Beesley Fuels is on hand to provide full guidance and advice along the way to help simplify your fuel transition as a result of the tax changes.

If your business falls in the below categories, you can continue to use red diesel:

  • Rail transport
  • Community amateur sports clubs and golf courses
  • Sailing, boating and marine transport (excluding private pleasure craft in Northern Ireland)
  • Travelling fairs and circuses
  • Fuel used for non-commercial purposes – electricity generation and heating
  • Agriculture, horticulture, fish farming and forestry

The fuels affected by the rule changes are

  • Rebated (white) diesel
  • Rebated (white) Hydrotreated Vegetable Oil (HVO)
  • Rebated biodiesel and bioblend
  • Kerosene taxed at the rebated diesel rate
  • Fuel substitutes

Sectors unable to use rebated fuel after 1 April

  • Construction and road maintenance
  • Logistics and haulage (including refrigeration units)
  • Mining and quarrying
  • Oil and gas extraction
  • Waste management
  • Commercial heating
  • Leisure
  • Airport operations
  • Manufacturing (such as ceramics, timber and steel)

Key points to note about the upcoming changes

  • If you’re not an exempt industry, you must have moved to full-duty fuels by April 1st 2022
  • You will not be required to clean and flush your tanks before moving to full duty fuels
  • Save all your invoices and receipts to prove that you haven’t been stockpiling and have been purchasing full-duty fuels
  • Non-commercial bodies can continue to purchase red diesel for heating and electricity generation

If after the 1st April, you have rebated fuel leftover that you’re no longer permitted to use, you must:

  • sell or give it to someone who’s allowed to use it
  • sell or give it to any Registered Dealer in Controlled Oil (RDCO
  • dispose of it using an approved waste oil recycling or disposal company

You can sell or dispose of the fuel without needing to be approved by HMRC as an RDCO, but you must hold on to all records to demonstrate how this was done. It’s essential that you dispose of rebated fuel safely and correctly by using an approved waste oil recycling or disposal company like Crown Oil.

Rules surrounding standby electricity generation and critical equipment

Standby electricity generation refers to those which are used to ensure continuity of power for a critical or essential service, such as:

  • protecting national security
  • health services such as medical and life support equipment
  • water, fuel and power supply
  • emergency services and law enforcement
  • protecting the welfare of livestock and other animals

Please note: this doesn’t include generators that are used every day as the main source of electricity.

Rebated fuel can also be used for:

  • commercial electricity generators that help manage pressures on the national grid
  • in instances where a volume of back-up fuel is needed for security and regulatory purposes to sustain vital electricity supply

After 1st April, you can only use rebated fuel in a machine that is used for generating power in non-commercial premises. You can use up any rebated fuel that you acquired before the 11 June 2021 for standby electricity generation in premises used in commercial premises or for critical equipment used in commercial premises

If you expect that you’ll have rebated fuel which was acquired for either of these uses on or after the 11th of June 2021, contact HMRC at oils.policymail@hmrc.gov.uk. They will determine if you can be issued a licence in which you can pay the difference in duty between the rebated and non-rebated rates and use up the rebated fuel on hand on the 1 April for a non-accepted use.

Please note:

  • A licence will not allow you to continue using rebated fuel indefinitely and will be reviewed
  • You will only be permitted to use rebated fuel that you have until the 1st of April 2022 and then it will be withdrawn
  • After this date, you must only order and take supply of diesel where full duty has been applied

HMRC does not expect you to flush out rebated fuel from storage or running tanks that are used for:

  • stand-by generators
  • critical equipment

We can help with all aspects of your fuel changeover

  • Uplift and buyback your rebated fuel
  • Full tank clean if required
  • NDT inspection – vital if your tank is over 10 years old
  • HVO supplied at competitive rates with excellent credit terms available

Call 0330 123 1144 to speak to a fuel expert to ensure your business is operating within the law.

HVO

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  • White HVO fuel
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Rebate fuels information

For all the key information on the red diesel duty changes, download our PDF.

Download our Rebate Fuels FAQ PDF

Rebate Fuels FAQ Link

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