Government changes to red diesel

Red diesel is the primary fuel used to power construction machinery and other off-road vehicles. The main difference between red diesel and regular diesel is that red diesel is dyed red. That way, it will deter machine operators from using their industrial vehicles on streets and roads.


The government provides rebates to businesses entitled to use or supply red diesel, which is why it is also called rebated diesel. Specific rules must be followed for businesses to receive special rebates and tax advantages. However, these rules are changing all the time.


The Finance Bill 2021 measure was passed last year and takes effect on April 1st, 2022. Previously, the government allowed red diesel use in all off-road vehicles and machines. Purchasing red diesel allowed people to avoid paying the full excise duty tax normally imposed on white diesel sales. But now, more limitations have been put in place to restrict the use of red diesel.


For instance, now you must use red diesel fuel in machines, vehicles, vessels, or appliances for specific purposes only. These purposes include forestry, rain transport, heating, power generation, sailing, boating, agriculture, horticulture, and fish farming. In other words, they have to be for productive purposes approved by the government.


As a result, red diesel can no longer be used for sport or recreational purposes. You also cannot use red diesel to help construct buildings for agricultural purposes either. Instead, you’ll have to use traditional white diesel and pay the full excise duty tax. This could mean more expense for a business no longer approved to use red diesel under these new laws.