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Last edited 19 May 2021
|This fuel pump dispenses red diesel to patrons who use the fuel for boats, agricultural vehicles or other authorised users. It is not intended for use in standard road-going vehicles.|
Red diesel is a type of gas oil (or diesel) that is chemically marked and dyed to prevent it from being used by road-going vehicles. It is most commonly used as a fuel for off-road vehicles and machinery used in construction, agriculture, forestry and fishing. It can also be used for power generation and heating applications.
 Reasons for red diesel
Red diesel is a rebated fuel which is less expensive than white diesel. White diesel (which has no marker or dye) is intended for use in diesel engine road vehicles. It has a fuel duty rate of 57.95 pence per litre (ppl) (2021 level) whereas red diesel is entitled to a rebate of 46.81ppl (2021), giving it an effective duty rate of 11.14ppl.
 Modifications introduced in Budget 2020
In the 2020 Budget, the Government announced that it was removing entitlement to use red diesel from most sectors, other than agriculture, horticulture, forestry, fish farming, rail and non-commercial heating. This change is scheduled to go into effect 1 April 2022.
Businesses losing their entitlement to use red diesel and will need to switch to white diesel. This will include construction, mining and quarrying, ports, manufacturing (e.g. ceramics, steel, timber), haulage (for transport refrigeration units on lorries), road maintenance, airport operations, oil and gas extraction, plant hire, logistics and waste management.
These businesses will need to pay the full duty rate for using white diesel and will therefore experience increased costs. It is hoped that this will encourage fuel users to seek greener alternatives or to use less fuel.
 Anticipated disruptions
One-off costs will include familiarisation with the changes for those sectors no longer entitled, including costs in running down or removing red diesel and rebated biofuels from vehicles, machinery and storage tanks, and possibly from selling back any excess red diesel stock to fuel suppliers. There are also likely to be costs associated with sourcing alternative fuels for those sectors no longer allowed to use rebated fuels.
The Government will aim to reduce some of these familiarisation costs by carrying out further pre-implementation publicity to make businesses aware of the changes, including providing guidance to support businesses to ensure they comply with the new rules. It will also allow some latitude to businesses during the transition, including allowing businesses to use up red diesel taken in before the change, as long as officials can be satisfied that the user has not taken red diesel into the fuel system after the change in rules for usage.
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