What is the UK Red Diesel Ban?

April 1st 2022 looms near. This date will mark the end of an era as rebated diesel and biofuels for industrial uses become a thing of the past.  The concept of diesel dyed red in order to differentiate it as a rebated fuel appeared in 1961. To date, “red diesel” used in industries such as construction, logistics, fishing and agriculture (amongst others) is sold with an applied tax rate of 11.14 ppl as opposed to the 57.95 ppl tax rate applied to regular “white diesel”.

As of April 1st 2022 this deduction will no longer be applicable to all but a handful of users. This means that most industrial and commercial consumers will have to purchase diesel at the same price as private users with no tax deduction.

Why is rebated diesel being phased out?

The British Government  has committed to ending the UK’s contribution to global warming byreducing all carbon emissions, with the goal of net-zero carbon emissions to be produced across the UK by the year 2050. The plan includes a series of restrictions and incentives affecting all conceivable residential and commercial areas of CO2 output: from home heating systems to commercial vehicle use. 

In view of this, the 16th of November 2021 saw the publication of an update to the ‘reform of red diesel and other rebated fuels’ entitlement, setting a date for the end to the tax rebate available on diesel.

Who is affected?

The ban on red diesel will affect all  industries, save a few such as agriculture, commercial fishing fleets, rail and non-commercial power generation and heating uses. The construction industry, however, will be strongly affected as the end of the rebate is applicable to all machines and vehicles used across this industry, including generators used for heating and power generation.

Plant hire firms will suffer an additional headache as many hire out machines to a range of industries, so that the same excavator that is being used for agriculture with red diesel would need to have its tank thoroughly flushed out to eliminate all traces of red diesel dye before being used on a construction project. This additional machine downtime results in yet another cost 
 

The measure, in context.

The timing for this measure could not be worse. The tailing off of Covid related restrictions has seen a time of great economic growth, but also of soaring inflation. Fuel prices hit record highs during the energy crisis at the end of 2021, only for those records to be beaten again due to the Russian invasion of Ukraine, which has seen bans placed on imports of Russian products, including much needed gas.  At the time of writing in March 2022, diesel prices have hit new record highs of 173.4ppl, with industry advisors warning the Government and consumers to brace themselves as the price of diesel may reach up to 300ppl.  

Affected industry members have raised the alarm with the government at the potentially catastrophic impact this combination of factors will have on businesses. As further increases in business running costs and the cost of living will result in some companies seeing profit margins being decimated to the point of making their businesses unviable.

CPA (the Construction and Plant Hire Association) are amongst the bodies appealing  to the government for a review of this measure as numerous campaigns seen across social media call out for a reduction on taxes, estimated to be at between 80-90 ppl on diesel.

Unfortunately these appeals are yet to see any results, leaving many industries including the construction industry bracing themselves for the impact of the measure.

As the date for the red diesel ban in construction approaches, all eyes are on the government to provide critical respite for these threatened industries.

If you are interested in tool or plant hire in Buckingham,get in touch with Paragon today. We stock an extensive range of equipment and machinery for a wide variety of construction projects.

For information on our products and services, call today on 0800 640 9878 to speak to a member of our expert team. We are always on hand to answer your questions and to advise on the best equipment for your job.