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This guide covers everything you need to know about the law changes, the impact it may have on your business and how WowNow Hire can help make the transition to this new law as easy as possible.
What is the new law?
The UK government has announced that from 1st April 2022, it will become illegal to use red diesel and rebated biodiesel for many commercial applications, except for agriculture (as well as horticulture, forestry and fish farming), rail and non-commercial heating. This covers the majority of users in the construction industry and will affect all diesel-powered items supplied through WowNow Hire and our partners.
As a result, WowNow Hire will cease to use red diesel in the supply of any affected machinery after 1st April 2022. Further information regarding this law change is available here: https://www.gov.uk/government/publications/reform-of-red-diesel-entitlements/reform-of-red-diesel-and-other-rebated-fuels-entitlement
Why has the law changed?
The changes to the rules around red diesel are a part of the UK government’s efforts to achieve the target of ‘net-zero’ carbon emissions by 2050. The purpose of the new legislation is to incentivise energy efficiency and the use of cleaner fuel alternatives. Red diesel accounts for around 15% of all diesel used in the UK, which produces almost 14 million tons of CO2 per year.
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What is the impact of the new legislation?
The primary impact of the new legislation for businesses will be financial. Red diesel is currently entitled to a rebate of 48.81 pence per litre (ppl), giving it an effective duty rate of 11.12 ppl. However, regular white diesel is not subject to a rebate, resulting in a duty rate of 57.95 ppl.
The long-term impact for businesses making a switch from red diesel to white diesel or HVO, will incur an additional cost of 46.81 pence per litre. As a result, this will greatly increase the running costs of diesel construction equipment, with the regular price of diesel incurring a fuel duty 5 times that of red diesel.
The short-term impacts of this legislation change 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, storage tanks and from selling back any excess red diesel stock to fuel suppliers. There are also likely to be additional costs associated with sourcing other alternative fuels for those sectors no longer allowed to use rebated fuels.
What will happen on 1st April 2022?
From 1st April onwards, all vehicles and machinery being used for construction-related purposes must only be filled with white diesel or duty-paid biodiesel fuels (HVO). Construction plant-hire companies and construction-based clients and customers cannot add red diesel to fuel tanks or fuel storage tanks based on construction sites, after the 31st March.
Do I need to drain my fuel tanks if they contain red diesel after 1st April 2022?
HMRC will take a pragmatic approach to enforcement. It has been accepted that there will be traces of red diesel in fuel tanks for some time after 1st April 2022. As a result, it will be the responsibility of the equipment owner to be able to show that any rebated fuel was legitimately added before then.
Is there an acceptable level of mixed diesel allowed in a tank? If so, what percentage/shade of pink is acceptable?
You need to be able to show rebated fuel in the tank was there before 1st April 2022. You can continue to use red diesel up until March 31st. Thereafter, you will only be able to refuel with white diesel/ HVO. As a result, over time your fuel will slowly dilute until all remnants of red diesel will diminish from your fuel tank.
Who is responsible for ensuring that red diesel is no longer used in plant and equipment for construction work?
What happens if plant and equipment is running continuously (e.g. power generation) where the tanks cannot be flushed out or a minimum level of fuel must be maintained for safety reasons?
Businesses will need to show that they have been refilling with the correct fuel since the rules changed, e.g. by showing receipts for the purchase of white diesel. Businesses may use up rebated fuel held in storage tanks for the purposes of emergency backup power generation (where a generator is used to provide continuity of power in the event of power failure) after the rules change.
Can agricultural equipment that uses red diesel be used on a construction site under the new legislation?
The new legislation does not apply to the specific type of equipment, but to its use. If you’re using equipment that is used in both an agricultural and construction setting, you will need to use white diesel to be able to comply with the new regulations. You will be able to use red diesel for when operating this equipment agriculturally but will need to remove all traces of red diesel before refilling the equipment on a construction site.
Why is the rebate for HVO and other biodiesels being removed at the same time as red diesel?
The development and use of HVO and other biodiesels as alternative fuels in construction plant machinery has been well documented in recent months. Seen by many users and suppliers as an environmentally friendly alternative to using fossil fuels such as red and white diesel, its popularity has increased. Yet from 1st April, users will have to pay the full duty on these fuels – they will be treated the same as traditional diesel fuels. As an example, HVO is a liquid hydrocarbon under HMRC excise purposes, it is classified as ‘heavy oil’ and is therefore treated the same as diesel.