*Please note: The changes discussed in this article are now in full effect.
The construction industry has normally used red diesel in the machines it runs off road and many firms have their own tanks and pumps to refuel vehicles in yards before they are transported to site.
From 1 April 2022 no machines engaged on a construction project will be able to use red diesel.
So, what does this include?
You can’t use red diesel or any rebated biofuels, rebated hydrotreated vegetable oil, bio blend and fuel substitutes, after 1 April 2022 in vehicles or machines involved in construction projects.
What will I have to do?
You will have to run your tanks down to the lowest level possible before 1 April 2022 before refilling with ordinary diesel. There is no need to drain or flush these tanks. The rule to work to is that no vehicle can be filled with red diesel after 1 April 2022, so there must be nothing in the storage tanks and vehicle tanks prior to that date. Refill with ordinary diesel as close to that date but before it.
The internal tanks in vehicles and machines should similarly be used up prior to the change date. Again, there is no need to flush.
What should I do to prepare?
You must look at current stock and plan for as low a stock of red as is sensible before the deadline, checking the safety levels on tanks, and that perhaps there will be sludge in the very bottom of old tanks. Then refill with ordinary diesel before the change date. You must look at the consequences for your business of any long-term contracts that involve a lot of machines, where the costs will rise.
What happens if I have a large supply of red diesel?
If you have large stockpiles of red diesel and there is no way of using it up, HM Revenue and Customs (HMRC) suggest selling it back to the dealer who supplies you or disposing of it using safe and professional methods. If these options are a problem, HMRC have requested that they are contacted.
How do I accommodate the price rise?
When setting up a contract you will have to consider whether the terms allow for cost increases, and whether the change to fuel prices requires changes to your pricing structure. Plant hirers may also increase prices to accommodate for the use of only one type of fuel in their products.
What will the policing of this be like?
There will be some leniency in the first few months as traces of red diesel might be found. But from June 2022 expect stricter policing of the new rules. HMRC say that any machine that has run on red diesel will always show traces, but their testing is good enough to show a small trace in an engine and one that has been filled with red diesel. As time goes on this will be more and more easy to distinguish.
HMRC are asking fuel dealers to watch for customers ordering beyond their normal requirements or showing signs of stockpiling.
What happens if I’m found to be in breach of the law after the deadline?
Vehicles working on a construction project will be liable to confiscation and fines if they are found to have been filled with red diesel after 1 April 2022.
What has the FMB been doing to support members?
Read our blog here on red diesel to find out what the FMB has been doing with respect to this.
Authors
Liz Bridge
Liz is the secretary of the JTC and has been in post since 1990. She began her career with HMRC on their fast track scheme training graduate inspectors to take charge of local tax offices. She managed a local office, moved to tax a major bank and then went on to work on international issues in a policy role. In 1990 she left HMRC to become Head of Tax at the then Building Employers Confederation (BEC) and to run the Joint Tax Committee as it’s Secretary.
