From 1st April 2022, firms will no longer be allowed to use red diesel to power non road mobile machinery and other plant. You will need to pay the full rate of duty on diesel from this date and cannot buy red diesel, or put it into your equipment.
HMRC has issued formal guidance which sets out their approach to the switchover from rebated (red) to full-rate (white) diesel. HMRC have stated they will be “pragmatic” and will be focusing on people illegally using red diesel after the switchover date. However, businesses will need to take a few steps in order to ensure they can demonstrate they are complying with the law under the new rules.
Red diesel cannot be legally put into equipment or vehicle tanks after 1 April 2022 in our sector.
HMRC has advised sites to run down their fuel supplies to “as close to nil as reasonably practicable” and that businesses should only order fuel they expect to use by that date. They have recognised the technical limits on emptying tanks.
The definition of “as close to nil as reasonably practicable” is not set but in effect this means that businesses must take reasonable and proportionate steps to minimise their level of surplus fuel but are not required to take disproportionate steps. This will vary slightly from tank to tank based on the minimum required will depend on the tank design. It will also depend on the costs and risks associated with removing surplus fuel.
HMRC give three options for dealing with any surplus fuel above this level.
- Returning it to your supplier. However, MPA understands that most suppliers will not be taking returns for contamination reasons.
- Selling or giving it away to permitted users such as local farmers. You will need to keep a record of any such sales. MPA has also raised health and safety and practicality concerns, with access to sites for untrained visitors unfamiliar with the industry presenting some risk for a one-off visit; transporting the fuel from your site to local Farms would have similar risks around the equipment and qualifications needed. This is likely to be disproportionate to the revenue risk.
- Paying to dispose of it via an approved waste oil recycling or disposal company.This should be a last resort and in most cases the cost would be disproportionate to the revenue risk except in cases of gross stockpiling.
Since all three of these options are difficult and/or likely to be disproportionate, it is a good idea to minimise any surplus to get to be “as close to nil as reasonably practicable” before refilling with white diesel. You will need to factor this into your fuel ordering in the period before 1 April.