Red diesel

The measure

The government has announced that entitlement to use rebated diesel (‘red diesel’) or rebated biofuels is to be withdrawn, except where it is used for the following purposes:

  • agriculture (including horticulture, pisciculture and forestry);
  • rail; and
  • non-commercial heating (e.g. domestic heating).


Who will be affected?

These changes will impact the construction sector, with construction vehicles such as mobile cranes, digging machines and road surfacing vehicles currently permitted to use rebated fuels subject to certain conditions. Following the Chancellor’s announcement, such vehicles will no longer be entitled to use rebated fuels and will be required to pay the full duty rate on fuel purchases.

For owners/operators of private pleasure craft, the measures announced will require that only ‘white diesel’ can be used to propel the vessel. Under the current legislation, operators of private pleasure craft are permitted to use red diesel for convenience, although they are required to pay the full rate of duty on the fuel. This distinction will end following implementation of the announced measures, although vessels containing a separate onboard tank for heating purposes may continue to use red diesel for heating purposes only.


When will the measure come into effect?

The outlined measures will take effect from April 2022.

Our view

These measures are to encourage a transition to more efficient or ‘cleaner’ vehicles. With the unrebated duty rate presently at 57.95p per litre compared with a rate of 11.14p per litre for rebated fuel, those affected by the change could face a significant rise in their fuel purchasing costs. Businesses have until April 2022 to assess their options.