At the Budget in 2020, the government announced that it will remove the entitlement to use red diesel from most sectors from April 2022.
This means that most businesses across the UK using red diesel will need to use fuel taxed at the standard rate for white diesel from April 2022, which more fairly reflects the negative environmental impact of the emissions they produce.
The government (HM Treasury) launched a consultation to make sure it has not overlooked any exceptional reasons why other sectors should be allowed to continue to use red diesel beyond April 2022. The consultation closed on 1 October 2020.
Those entitled to use red diesel pay a duty rate of only 11.14 pence per litre (ppl), which is significantly less than those using standard road fuel diesel (duty rate of 57.95ppl), a saving of nearly 47ppl (an 81% discount). On top of this, red diesel is subject to a reduced 5% rate of VAT for supplies up to 2,300 litres. For commercial supplies over 2,300 litres, the standard 20% VAT rate applies. Users of red diesel are therefore paying far less for the harmful emissions they produce than individual car owners for example, even though the emissions produced from using one litre of diesel are broadly the same in both cases.
Also in this article:
- Businesses will have until April 2022 to prepare before any changes take effect.
- Fuel suppliers
- Fuel users
- Other fuels
