{"id":110299,"date":"2022-05-04T15:24:06","date_gmt":"2022-05-04T14:24:06","guid":{"rendered":"https:\/\/www.pbctoday.co.uk\/news\/?p=110299"},"modified":"2022-05-04T15:24:06","modified_gmt":"2022-05-04T14:24:06","slug":"red-diesel-rebated-fuel-construction-industry","status":"publish","type":"post","link":"https:\/\/www.pbctoday.co.uk\/news\/energy-news\/red-diesel-rebated-fuel-construction-industry\/110299\/","title":{"rendered":"Ending of rebated fuel: Will the construction sector see \u201cred\u201d or \u201cgreen\u201d?"},"content":{"rendered":"

Friday 1 April 2022 marked the end of rebated fuel for the UK construction industry. David Savage, a partner in the construction team at Charles Russell Speechlys,<\/a> discusses the new regulations and their likely impact on the sector<\/h2>\n

Rebated fuel, also known as \u2018red diesel\u2019,<\/a> was used in offroad vehicles and machinery, most notably in the construction and agriculture sectors. Users are entitled to a rebate on the tax or duty paid on the fuel purchased. \u201cRed\u201d diesel is exactly the same fuel as regular \u201cwhite\u201d diesel but has had a red dye added to it to prevent its misuse in regular road vehicles.<\/p>\n

As of 1 April, contractors must ensure that the plant and equipment they use on site is always filled with the correct fuel \u2013 and, if that fuel is diesel, then it must be white diesel. HMRC has made clear that they expect relevant tanks to be flushed to remove all traces of red diesel when switching from entitled to non-entitled use. In terms of responsibility for making these changes:<\/p>\n

Plant owners should be seeking confirmation as to whether their plant and equipment is to be used for an entitled purpose or not, with construction work from 1 April 2022 obviously being a non-entitled purpose.<\/p>\n

Hire companies should be making their customers aware that the fuel they are permitted to use will be determined by the use of the hired machine or vehicle (as there are some uses which still permit rebated fuel etc). If in doubt, supply the plant or vehicle with white diesel.<\/p>\n

Contractors are directly responsible for filling their vehicles, plant and equipment with the correct fuel, which in the case of diesel must always be white diesel.<\/p>\n

Suppliers who are Registered Dealers in Controlled Oil are responsible for making their customers aware of the rule changes and were also required to ensure their customers did not purchase red diesel in quantities to stockpile it before the rule change came into effect etc.<\/p>\n

\u201cWhite\u201d diesel for road cars is taxed at 57.95p per litre, whereas red diesel has – until 1 April – qualified for a rebate of 46.81p per litre. This has meant that red diesel\u2019s effective duty rate is just 11.14p per litre, some 47p per litre cheaper than white diesel. That was a reduction on the diesel tax rate of over 80%.<\/p>\n

\"rebated<\/p>\n

Encouraging the adoption of greener alternative technologies<\/h3>\n

The government\u2019s position on this change is driven by a desire to ensure fairness between the different users of diesel fuels, the encouragement of development and adoption of greener alternative technologies, and additional \u201cgreen\u201d dividends around seeing fuel users improve the energy efficiency of their vehicles, plant and machinery.<\/p>\n

From 1 April 2022, where rebated fuel is being used in a vehicle or machine that is not entitled to use it, HMRC is entitled to seize the vehicle or machine and may issue a fine of \u00a3250. They can also apply a penalty of up to 100% of the duty that has been evaded.<\/p>\n

Practical advice to construction businesses around these changes would include ensuring that receipts or invoices for the purchase of fuel, contracts for hire or plant, and timesheets for drivers and operators are all are retained so that full evidence is available to the HMRC – should it be required \u2013 to evidence use of the correct fuel post 1 April 2022. There is an exemption that allows business to use up rebated fuel held in storage tanks for the purposes of emergency back-up power generation.<\/p>\n

The government had announced red diesel\u2019s demise back in the 2020 Budget<\/a>, and no doubt the construction (and agriculture) industries have appreciated the two-year lead-in time to red diesel reform, which will have given businesses in these sectors time to prepare for this tax change.<\/p>\n

Nevertheless, coming after two years of pandemic-related disruptions to construction supply chains, and now significant fuel and materials price volatility caused by Russia\u2019s war in Ukraine, the change will only accelerate construction price escalation. In an industry already dealing with tight margins, these price escalations will likely need to be borne by the clients of the sector.<\/p>\n

The loss of red diesel will impact plant and equipment fuel costs<\/h3>\n

The loss of red diesel will particularly impact subcontractors with significant plant and equipment fuel costs, such as earthmoving and groundworks contractors. For these specialist subcontractors, overall operational costs could easily rise by 5%-6% as a result of the reforms. While unwelcome at one level, the broader UK construction sector is increasingly committed to its net zero commitments. In that sense, I suspect \u201cgreen\u201d trumps \u201cred\u201d on this occasion.<\/p>\n

 <\/p>\n

David Savage<\/strong><\/p>\n

\"rebated<\/p>\n

Partner and co-lead of the construction and infrastructure team<\/p>\n

Charles Russell Speechlys<\/p>\n

Tel: +44 (0)7764 146405<\/p>\n

david.savage@crsblaw.com<\/a><\/p>\n

www.charlesrussellspeechlys.com<\/a><\/p>\n

Twitter:\u00a0@crs_lawyers<\/a><\/p>\n

LinkedIn: Charles Russell Speechlys<\/a><\/p>\n

\n<\/div>","protected":false},"excerpt":{"rendered":"

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