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Gas Oil Duty Changes 

What changes are being made to Gas Oil duty?

In the March 2021 budget, the Government confirmed forthcoming changes to red diesel taxation, with plans to withdraw tax relief for red diesel for several sectors and user groups, these changes will come into effect from the 1st April 2022.  

The change is being introduced to encourage the development and usage of cleaner, more sustainable fuels such as hydrotreated vegetable oil (“HVO”) instead of fossil fuels to aid the government’s commitment to achieving target Net Zero emissions by 2050.  

What is red diesel? 

Otherwise known as gas oil, off-road diesel or ‘tractor diesel’, red diesel is a fuel intended for use other than as a fuel in road vehicles and is therefore taxed at a lower rate than white diesel, also known as road diesel or DERV. Due to it being taxed at a lower rate there are strict legal requirements about when and how it can be used.  

What is changing?

As of 1st April 2022, many sectors that use red diesel will need to move to an alternative fuel that is taxed at the standard rate for white diesel. Whilst many businesses may have assessed their usage and planned their transition to alternative fuel, some will be unsure of whether they remain exempt or not and what the financial implications will be to their business when switching from red to white diesel.

Who will be affected by the changes?

If you currently use red diesel in machinery, vehicles, generators or for heating purposes in the following sectors you will be affected by the changes and need to make the transition to an alternative fuel. 

  • Construction, mining, and quarrying Manufacturing 
  • Plant hire Transportation/ logistics
  • Waste management
  • Highway maintenance 
  • Airport activities
  • Ports and harbour activities

What sectors can still use red diesel?

From the 1st of April 2022, WCF Fuels North West will only be able to supply red diesel to your business if the application is for the sole purpose of the following: 

  • Agriculture, horticulture, forestry, and fishing
  • Flood and snow clearance including gritters 
  • Propulsion of passenger, freight, and maintenance vehicles on rails
  • Propulsion of commercial boats including passenger ferries and water freight
  • The powering of machinery (including caravans) of travelling fairs and circuses
  • Non-commercial heating in homes, places of worship, NHS hospitals, town halls and permanently moored houseboats 
  • Amateur sports clubs and community sports centres, golf courses (including activities such as ground maintenance, and the heating and lighting of clubhouses, changing rooms etc.) 

If your application is included in the above list of qualifying uses, there will be no change at all. You can continue to order, receive and use red diesel after the changes come in.

If my business is affected by the changes, what alternative fuels to red diesel can I use? 

Suitable replacements for red diesel are either standard White Diesel (Derv) or hydrotreated vegetable oil (HVO) 

What will the price difference be?

Gas Oil users currently only pay 11.14p per litre in duty in contrast to the 57.95 ppl for derv. This means switching to derv will increase the duty you have to pay by 46.81p per litre. Depending on how much you buy a year this could substantially increase your fuel bill and impact your available credit limits. 

How can I make sure I am compliant with HMRC rules?

As you’ll be aware, the red dye in gas oil is added so that it remains in both pipework and fuel tanks. This could lead to authorities believing that anyone who is now using derv might have illegally used gas oil previously. However, HMRC has confirmed that customers who switch from gas oil to derv won’t be required to flush out their tanks, avoiding the high cost associated with flushing. We advise that you manage your stock of gas oil to run down to as close to zero on 31st March 2022 as is practically possible. As far as we are aware, HMRC will not be conducting physical checks at our customer's premises. However, they will look at paper records and ordering patterns to ensure those impacted by these changes managed their stock in such a way to achieve a clean switch to derv from 1st April. You should keep hold of any fuels invoices and avoid stockpiling.   

How can I keep my diesel secure? 

Those customers who will be storing larger quantities of white diesel should ensure that their premises are secure to mitigate the risk of theft. Tank monitoring or telemetry systems are also available to alert you to any unusual patterns of fuel movement.

Updating your Customer Declaration of specific use of rebated (Red) Diesel

In order for WCF Fuels North EWest to supply red diesel to your business, please download our updated customer declaration form or request a copy at Sales@wcfnw.co.uk or by calling 01524 733669 

Help and support

Here at WCF Fuels North West, we want to support our customers through this period of transition to ensure we achieve this deadline with minimal disruption to your business. Our trusted advisors will be happy to answer any questions you may have about these changes. Here is a link to the Government website (“Gov UK – Reform of red diesel and other rebated fuels entitlement”) which sets out these changes in more detail.

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