Counting the cost of red diesel restrictions

While the Chancellor’s 5p per litre fuel duty cut on petrol and diesel was welcomed by the construction industry, it is undoubtedly overshadowed by the significant cost of red diesel usage restrictions that were introduced on 1 April 2022. The restrictions are being introduced to help meet the government’s climate change and air quality targets.

Despite much lobbying by the construction industry, it is no longer legal to use red diesel for non-road mobile machinery such as bulldozers and cranes or portable power generators on building sites since 1 April. Businesses can use up any remaining fuel they legally purchased before 1 April, but most will have already been preparing for the change by running down their existing supplies. Red diesel which remains in storage tanks after 1 April 2022 must be safely removed or transferred to someone who is still allowed to use it. However, tanks do not need to be flushed out.

Who can use red diesel?

Long-standing plans to phase out government subsidies to fossil fuels mean that only agriculture, circuses, golf courses, and boatyards will be entitled to use the subsidised fuel after 1 April 2022.

Red diesel contains red dye (and other chemical indicators) to indicate that it is rebated diesel and therefore, attracts less fuel duty than normal (white) road fuel diesel. The red dye enables HM Revenue and Customs (HMRC) to conduct spot checks to see whether red diesel is being used illegally.

Richard Beresford, chief executive of the National Federation of Builders (NFB), said: “The Government has limited control over the annual price increases of gas and electricity, which in the last year have gone up by twenty-nine percent and nineteen percent respectively but in the red diesel rebate, it has the power of deferral so that industry pays a 47% increase on pre-pandemic fuel costs, rather than 191%.”

Problem areas

Now that the rules have changed, difficulties arise in relation to vehicles or machines used for both ‘allowed’ and ‘non-allowed’ purposes. If white diesel is not used for all purposes, the tank will have to be flushed out to remove all traces of rebated fuel when switching uses.

HMRC can seize vehicles and machines found to be illegally using red diesel. Penalties such as fines and criminal restrictions can apply to those found to be intentionally or carelessly breaking the rules.

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