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