Changes to Tax Relief for Red Diesel

24 September 2021

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• In March 2021, Chancellor of the Exchequer Rishi Sunak confirmed changes to tax relief for Red diesel (Other well known names for Red diesel include Gas Oil, Tractor Diesel & Cherry Red). He described Red diesel as “a £2.4bn tax break for pollution that's also hindered the development of cleaner alternatives” and that “some of these sectors are the biggest contributors to our air quality problem”.

• Current duties will remain until Thursday 31st March 2022 and the new taxation legislation will be introduced from Friday 1st April 2022. The changes will result in the removal of tax relief for some applications and sectors.

• However, this change does not apply to all sectors, there will be some exemptions including Agriculture, Horticulture, Forestry, Fish farming, Railways and Non-commercial heating systems (for example, homes, boats, places of worship).

• Sectors such as construction, manufacturing and logistics will no longer be eligible for rebates on their Red diesel consumption. From Friday 1st April 2022, Gleaner and other UK fuel distributors will not be able to supply red diesel for non-exempt applications. Businesses affected by the changes should not purchase Red diesel for use beyond 1st April 2022 and must run-down existing stock prior to the switchover date.

•  The list of customers exempt from these changes can be found here: https://bit.ly/3lb1ete

• This is part of the UK Government’s efforts to meet the 2050 net-zero carbon target. By taxing most users at the standard rate for diesel, it is intended to reflect the impact of the emissions they produce, which at the same time promotes energy efficiency and the use of cleaner fuel alternatives.

• Red diesel currently attracts a rebate of 46.81 pence per litre (ppl), giving it an effective duty rate of 11.14ppl. White diesel (or DERV) has no rebate, which means a duty rate of 57.95 ppl. Therefore, making a direct change from Red to White diesel would incur an additional expense of 46.81 ppl used. This will clearly have a big impact on costs as well as cash flow for many businesses.

• Customers should also be aware that other fuels that are currently subject to duty rebates for certain applications, such as kerosene and fuel oil, are also currently under Government review. Any further changes will be communicated as and when confirmed.

• UKIFDA, Trade Association for the liquid fuels distribution industry, will continue to discuss these changes with Government and Gleaner will keep you updated with any changes as things become clearer. Gleaner will continue to support you, our customers, and keep you informed through these legislative changes and the impact on your business. Early planning is critical to understand the implications of the changing legislation. Gleaner offer a range of alternative fuel options and can help with tank flushing arrangements and storage where required.

• Please be aware, non-compliance may mean significant monetary fines handed out by the Government. Vehicles and plant may also be seized.