Why the Government’s Red Diesel Changes Aren’t All Bad for Business

What is red diesel?

Red diesel is a term for gas oil which is typically intended for use other than as fuel in road vehicles. Generally speaking, all vehicles using the road must use fully duty paid petrol or diesel at all times. Red diesel has to be marked with red dye (hence the name), as well as other chemical markers to prevent misuse in road vehicles. The dye stains the fuel tanks and other components red so it’s clear that it’s rebated, red diesel which has been used, and has therefore been subject to less fuel duty than normal. This has been the case since 1961. 

Who could use red diesel before the Government changes in April 2022?

Before April 2022, red diesel could be used across a number of sectors and for a number of reasons. Essentially, it could be used in any machine provided it was not a road vehicle and was being used for off road purposes. For example, it could be used to power things like mobile generators on construction sites and it could be used in non-road mobile machinery, such as cranes and bulldozers. 

What are the changes to red diesel use?

At Budget 2020, the government announced that it was removing the entitlement to use red diesel from most sectors, except for agriculture (as well as horticulture, forestry and fish farming), rail and non-commercial heating, effective from 1st April 2022. Those sectors that are permitted to continue using red diesel after April 2022 are listed below:

• vehicles used to propel passengers, freight, or maintenance vehicles designed to run on rail tracks.
• fuel for heating and electricity generation in non-commercial premises. This includes the heating of homes and buildings such as places of worship, hospitals, and town halls, off-grid power generation, and non-propulsion uses on permanently moored houseboats.
• fuel for maintaining community amateur sports clubs as well as golf courses.
• fuel for all marine craft operating in the UK (including fishing and water freight industries), except for propelling private pleasure craft in Northern Ireland.
• fuel for powering the machinery (including caravans) of travelling fairs and circuses.

However, the government has said it will continue to review the use of red diesel across these permitted sectors, especially as alternative fuel and power sources become available. In other words, that list could be getting even smaller in the future! 

What are the potential problems with the changes to red diesel usage?

Changing over from red diesel to white diesel will have a cost implication for many businesses. Here’s what you need to know:

• White diesel has a fuel duty rate of 57.95 pence per litre. 
• Red diesel is entitled to a rebate of 46.81 pence per litre, effectively giving it a duty rate of 11.14 pence per litre. 

For businesses who are making the switch from red diesel to white diesel, this means that for every pence per litre used, they would incur an additional 46.81 pence cost. 

This results in businesses paying five times as much duty as before, and it will have a significant impact on costs as well as cash flow for many businesses. Furthermore, if businesses are caught using red diesel after April 2022 when they’re not permitted to, it will be a criminal offence and perpetrators can be prosecuted and face heavy fines or even jail time if found guilty. 

What are the benefits of the change?

The government’s goal to drive down the use of red diesel is good news for the environment. The intention behind restricting the use of red diesel is to try and reduce the damaging environmental impact of fossil fuels, and the change was brought in to help meet the UK’s target of becoming carbon neutral by 2050. 

Removing the red diesel rebate for most users will raise taxes, which the government will reinvest into greener solutions. It will also serve as an incentive for businesses to move towards using cleaner energy sources that still do benefit from lower tax rates, and to eventually encourage more businesses to move away from using diesel as a fuel source altogether. 

Here’s where we can help with the switch from red diesel

We know many businesses rely on pressure washers to keep anything from their work areas, building exteriors, equipment and machinery clean and in pristine condition by effectively and efficiently removing grime and dirt, which accumulates over time. But where businesses would have been able to power an engine driven pressure washer with red diesel before the changes in April 2022, today they would be required to use white diesel to power the same machine. 

For many businesses the added expense of using white diesel to power an engine driven pressure washer in addition to other costs is not a viable option. That’s where our electrically heated pressure washer comes in. These pressure washers use 100% electricity for everything, from their controls, running the pressure pump and to heating the water. Not only do they deliver a first class clean, but their low running costs means they’re an excellent solution to the increased costs now associated with engine driven pressure washers. So if you’re thinking about making the switch to a greener and more cost effective cleaning solution, our experienced and professional team here at Fleetclean are on hand to guide you through the process.