Red diesel can be used only for specific purposes. There are severe consequences for unauthorised use, including seizure of vehicles and machines, an assessment to tax, and prosecution leading to a fine and/or imprisonment.
There were major changes to the way in which rebated “red” diesel (which is taxed at 10.18 pence per litre instead of the full rate at 52.95 pence per litre) could be used. From 1 April 2022, the system moved from allowing most off-road vehicles to use red diesel to allowing only specific machines used for a qualifying purpose to use red diesel.
This change mainly affected the following:
Vehicles and machines operating in these sectors should now be using full duty paid “white” diesel currently taxed at 52.95 pence per litre.
Sectors that can continue to use red diesel (for qualifying purposes) are:
Private pleasure craft (boats) refuelling in Great Britain can also use red diesel but must pay the duty difference to their fuel supplier on the fuel they estimate will be used to propel their craft. Private pleasure craft refuelling in Northern Ireland can only use red diesel for non-propulsion use (such as electricity generation and heating) if they have a separate fuel tank for this purpose. If the private pleasure craft refuelling in Northern Ireland only has one tank for both propulsion and non-propulsion use, only white diesel can be used.
It is possible that an excepted machine may be used for multiple purposes, some of which do not qualify. In this situation the sector the machine will operate in will be the starting point for determining whether or not red diesel can be used.
The most obvious example of an excepted machine used in different sectors and for different purposes is a digger. When this is used for a qualifying purpose, for example digging a ditch on a farm to reduce the risk of arable land flooding, it can use red diesel. If that digger is then used on a construction site, however, the fuel tank and whole system must be flushed to remove all traces of red diesel before switching uses. The other legal alternative is to use white diesel when the digger is being used on a farm.
Likewise, tractors and farm vehicles can often find themselves being used for non-qualifying purposes, for example towing stuck cars from festival sites and being used for waste disposal purposes when picking up waste and spreading it on fields. When these vehicles are being used for non-qualifying purposes, they also need the fuel tank and whole system to be flushed to remove all traces of red diesel beforehand. This is a very expensive process.
Special fuel duty permits are available to deal with circumstances that do not fit squarely with the law. You may qualify for a permit to mix kerosene (a heating fuel) with petrol for use in vintage tractors. Or you may qualify for a permit to use red diesel if you can prove that you cannot reasonably obtain white diesel.
If you have a permit, you would need to comply with the relevant conditions and record keeping requirements. You would also be required to pay the duty difference between the red diesel and the white diesel to ensure the correct duty has been paid on the fuel.
The new red diesel legislation is complex, and therefore it is easy to make a mistake. Evelyn Partners can help you ensure compliance with the new red diesel legislation or applications for special fuel duty permits by reviewing your current operations and assessing whether these comply with the law.
Approval code: NTAJ14062340
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication.
Tax legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. You should always seek appropriate tax advice before making decisions. HMRC Tax Year 2023/24.
Some of our Financial Services calls are recorded for regulatory and other purposes. Find out more about how we use your personal information in our privacy notice.
Please complete this form and let us know in ‘Your Comments’ below, which areas are of primary interest. One of our experts will then call you at a convenient time.
*Your personal data will be processed by Evelyn Partners to send you emails with News Events and services in accordance with our Privacy Policy. You can unsubscribe at any time.
Your form has been successfully submitted a member of our team will get back to you as soon as possible.
Ireland 
USA 
