The red diesel and biodiesel fuel duty changes (recent blog) are located in the Finance Act 2021, which is enacted but not yet commenced. The blog post is corrected.
CORRECTION : the Finance Act 2021 is enacted. The Finance (No. 2) Bill is being debated. The changes identified below are located in the Finance Act 2021. The text below is amended.
Yesterday 16th November, the government issued information on its proposed changes to fuel duties – here.
The taxation of hydrocarbon oils is regulated by the Hydrocarbon Oil Duties Act 1979 (HODA) and numerous Regulations. It provides a rebate on heavy oils but this rebate is not allowed for any oil that will be used as fuel for a ‘road vehicle’.
Road vehicles not allowed to use red diesel or rebated biodiesel in any circumstances, unless they are ‘excepted vehicles’ as defined in Schedule 1 to the Act. Excepted vehicles include agricultural vehicles and specialist vehicles, such as those used in construction, haulage and some manufacturing.
Biodiesel, bioblends and fuel substitutes are subject to duty if set aside for a chargeable use and rebates are provided for in specified circumstances. Heating is not a chargeable use for these fuels.
The Finance Act 2020 made changes to HODA that are not yet commenced. These relate to private pleasure craft.
The Finance Act 2021 changes HODA (not yet commenced) –
• Only ‘excepted machines’ (new Schedule 1A instead of Schedule 1) will be able to use red diesel and rebated biodiesel.
• Heating will be a chargeable use for biodiesel, bioblends and other fuel substitutes (rebated rates when used in non-commercial heating).
Companies, individuals and civil society organisations that will lose their entitlement to use red diesel will need to switch to white diesel. This will include sectors, for example, such as 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.