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Withdrawal of red diesel entitlement

Rebated fuels – Changes to red diesel entitlement effective 1 April 2022

Supplementary document

The permitted uses for rebated fuels, e.g. red diesel, will be significantly reduced from 1 April 2022. It will then be illegal to put rebated fuel in equipment for a use no longer allowed after the rules change and any rebated fuel in the machine’s tanks, and in any storage tanks, must be run down to close to nil by the 1 April 2022 deadline. Users no longer permitted to use rebated fuel will need to use fuel (diesel or biofuel) which has had full excise duty paid, e.g. white diesel.

The permitted uses for red diesel will be restricted to certain equipment whilst used for:

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

Agriculture

The equipment permitted to use rebated fuels for agriculture includes:

  • Tractors
  • Non-road mobile machinery (NRMM), e.g. unlicenced forklift
  • Works trucks, e.g. road licensed forklift

Accepted purposes are specified in Excise Notice 75, clause 9, and include:

  • Growing and harvesting crops, ornamental plants, timber, etc
  • Rearing of animals for production of food, wool, etc

But exclude:

  • Construction of structures/buildings for purposes relating to agriculture
  • Purposes relating to sport or recreation
  • Transportation of produce, inputs or waste, except in specified circumstances

However;

  • Equipment using rebated fuel which is used for permitted purposes for agriculture, horticulture, fish farming or forestry, can be used for any other purpose on the Private land where it is ordinarily kept, and,
  • Rebated fuel can be used to travel to and from the place where the vehicle is used, including on the public highway (so long as the vehicle is licensed).

Note: HMRC have confirmed to us that it is permitted to use red diesel when a hire truck moves from Farm A to Farm B via the hire company depot so long as these journeys do not include any non-qualifying work.

Non-permitted use

For applications no longer able to use rebated fuel, the fuel in the vehicle/machine and in any storage tanks should be used up before 1 April 2022. However, vehicle/machine fuel tanks do not need to be flushed except where the equipment is switching between permitted and non-permitted uses.

Storage tanks only require flushing if they are owned/operated by an RDCO (Registered Dealer in Controlled Oil). However, stocks in storage tanks that cannot be used up prior to April 2022 cannot be used for non-allowed purposes (they can be sold to an RDCO or disposed of through an approved waste oil company).

Where a vehicle or machine is to be used for both allowed and non-allowed purposes, either:

  • flush out the tank to remove all traces of rebated fuel when switching uses, or,
  • use fully duty-paid diesel or biofuels for everything.

Equipment fuelled with red diesel whilst abroad in a jurisdiction where this is allowed, can use up the remaining fuel in the tank when returned to the UK. It is not necessary to flush the tank so long as documentary evidence demonstrating that the vehicle has not been refilled unlawfully in the UK can be provided.

There is Government advice for fuel users here.

Hire equipment

From 1 April 2022 rebated fuel must not be put into a vehicle, machine or appliance for a use that is no longer allowed and any fuel in the equipment should be used up before 1 April 2022. However, it is not required to flush the fuel tank except where the equipment is moving between permitted and non-permitted uses.

The hire company (owner of the vehicle/machine) is responsible for their equipment and it is their responsibility to make it clear as to users what type of fuel can be used for what purposes in the equipment. Therefore, the onus of responsibility is on the owner (hire company) to confirm that the tank has been either flushed to remove all traces of rebated fuel when switching uses or, instead, to ensure that only fully duty-paid fuel is used for all purposes.

The owner must ensure the correct fuel is put in to the tank prior to hiring out their equipment and must also take reasonable steps to ensure that the correct fuel is used in the machine when hired out, e.g. when refuelled by the user. If the owner (hire company) finds red diesel in the tank once a machines has been returned, they will need to flush this out. Therefore, hire companies are advised to review their contract terms and could considering amending contracts to show that they would charge the users to recover costs incurred.

However, we have been informed by HMRC that they understand that the owner cannot always control what fuel any given user may put into the tanks and so will consider each case on its own merit; if traces of red diesel are detected in the tank for a not permitted use, the hire company will be asked to prove with receipts/invoices that they had put the correct fuel in the tank, as will the fuel user, in order to determine who was in the wrong.

Registered Dealers in Controlled Oil (RDCO)

RDCO have a responsibility not to supply customers affected by the changes with more rebated fuel than they can realistically use before the rule change. An RDCO that repurposes a storage tank from red to white diesel is required to drain and flush the storage tank. Anyone who wishes to cease to be an RDCO needs to de-register and keep records to show how stocks of rebated fuel were disposed of.

There is Government advice for RDCO here.

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