Red Diesel Innovation Fund

Red diesel is also known as rebated fuel, 35-second oil, medium diesel, tractor diesel, marine diesel, generator diesel, DERV, gas oil, BS 2869, or cherry red or just the standard Red. Different names and terms for the same thing so what’s the big deal? asks Gary Barnes, Chairman CILT Northern Ireland.

Well the first thing would be the colour which we all know is just a dye and a few other chemicals thrown in. The outcome a fuel that stains the inside of the engine, fuel lines etc. but won’t cost you as much due to its lower rate of fuel duty. 

Why the lower rate? Well in short the taxes you pay for your standard White diesel should be going towards keeping our fantastic road network up to the amazing standards that we all love and drive on every day (yea right) With Red Dieselis supposed to be being used primarily for off road vehicles the tax rate is significantly reduced. Some people on the other hand still think its ok to use Red in their vehicles for everyday use (watch out for the dippers) not a great idea, and this could a small part of the reason for Red now being started to be phased out.

As some of you may or may not know from April 2022 the Chancellor has announced the partial removal of the entitlement to use Red Diesel and Re-Bated Biofuels

What does this mean to you and me? No more red and more cost (Well at least possibly a slow phase out).

This also is not going to be slow phase out of red and there is to be no grace period either, all machinery will need to be well flushed out to ensure no trace of red is left as HMRC and leniency don’t go hand in hand.

Red Diesel pretty much accounts for up to 15% of all diesel that is used in the UK each year a small but quite significant amount for our industries, that 15% now has to be replaced with the more expensive White Diesel and who has to pay the extra cost for the White?? Us.

For many companies across a multitude of industries not forgetting the stand alone farmers, builders etc. this will be a huge increase in monthly/yearly costs, plus for companies like the one work for the added cost of storage and extra security for storing White Diesel on site. The storage of White Diesel on work premises could be a not so honest persons dream, plus plant machinery, fridges etc. siting in laybys, building sites, gardens etc. full of lovely road legal White Diesel you might as well put a big red light above them saying “DRAIN MY TANK.”

There is however going to be exemptions for farmers and horticulture use so farmers using red for a tractor or a council cutting hedges can still use red diesel. 

The companies going to be hit the hardest are going to be those running fridge units to transport food produce and no exemptions for these. Although fridge units from ROI/EU can continue to use green diesel (their version of red) in NI and GB as long as user has proof of purchase of the green diesel in ROI and they are based there. I would expect a lot of NI operators who have depots in NI and ROI to avail of that opportunity.

Wider Implications

Also what could the wider implications of this be? Could we end up seeing a substantial increase in fuel laundering/smuggling? The waste product from laundering brings its own problems an extremely toxic sludge that is normally just dumped, who foots the bill for cleaning this up? Will people now look at alternative ways of avoiding paying the extra tax on White Diesel, of course they will. How will they do this? Well that would be telling, and I wouldn’t want to get into trouble with Customs & Excise!!

What alternatives do we currently have fuel wise? 

Hydrogen – Still in the very early stages of being refined and a long way off from being readily available for our industries.

Electric vehicles – From my own experience on the commercial side not great, low range, long charging times, not enough charging infrastructure, expensive etc etc

Gas powered vehicles – Again for our types of industries probably still not at a level that we require.

Other alternative fuels are available but again not really up to the required standards that we would need, plus a huge investment would need to be made by companies transferring to use any alternative fuels between buying new vehicle’s / machinery or converting current vehicles.

Trusted User Scheme

In the short term there may be a scheme for the end user to be able to claim some of the difference in the price of Red and White back but I believe this is still being ironed out. Perhaps one solution could be to have a Trusted User Scheme where you can show how much Red Diesel you used in the previous year and you get a certain percentage of tax relief on the White Diesel purchased to replace the Red Diesel? But unfortunately at least until a decent and fair process is put on the table it’s all of us who are going to have to stump up the extra cash in what is already very hard financial times.

I do agree that this is in principal a good move to try help reduce Greenhouse gasses and reduce Global Warming, but at what cost to all of our industries, when no other greener fuels are currently available to the required standard?

Who knows what the future holds and what alternative fuels will meet all of our requirements for us all to carry on doing what we all love in the world of EXPORT & FREIGHT.

*Gary Barnes CMILT is Transport Operations Manager / DGSA @ Balloo Hire Centres & Chairman CILT Northern Ireland. The views expressed in this article are his own and not official CILT / Balloo Hire policy.