The Government has recently announced gas oil duty changes, which mean that the rules on the tax relief of gas oil will be changing on 1^st April 2022. This removes the eligibility to use gas oil/red diesel for many businesses and industry sectors. The change is being introduced in part to help promote the use of green fuels such as hydrotreated vegetable oil ("HVO”) instead of fossil fuels to aid the government’s commitment to achieving target Net Zero emissions by 2050.

The revision to the current duty means that many customers who currently use red diesel will no longer be eligible to receive tax relief. The greatest impact will be felt in the construction sector although other commercial activities will also be impacted.

What is changing?

With effect from 1st April 2022, businesses affected by these changes will need to order and use derv (also known as white diesel) rather than gas oil (red diesel) to comply with HMRC rules for permitted use.

Which sectors are affected?

The following are the only sectors that can continue to use red diesel. If your business does not fall within any of these uses, then you will need to order white diesel.

·         Agriculture

·         Amateur Sports Clubs, Golf Courses and Fish Farming

·         Forestry

·         Horticulture

·         Non-Commercial Heating

·         Public Sector

·         Rail

·         Travelling Fairground

If I’m affected, what will it mean for me?

1.       Price 

Gas Oil users currently only pay 11.14p per litre in duty in contrast to the 57.95 ppl for derv. This means switching to derv will increase the duty you have to pay by 46.81p per litre. Depending on how much you buy a year this could substantially increase your fuel bill and impact on your available credit limits. 

2.       Compliance with HMRC rules 

As you’ll be aware, the red dye in gas oil is added so that it remains in both pipework and fuel tanks. This could lead to authorities believing that anyone who is now using derv might have illegally used gas oil previously. 

However, HMRC have confirmed that customers who switch from gas oil to derv won’t be required to flush out their tanks, avoiding the high cost associated with flushing. 

We advise that you manage your stock of gas oil to run down to as close to zero on 31^st March 2022 as is practically possible. As far as we are aware, HMRC will not be conducting physical checks at our customers premises. However, they will look at paper records and ordering patterns to ensure those impacted by these changes managed their stock in such a way to achieve a clean switch to derv from 1^st April. You should keep hold of any fuels invoices and avoid stock piling. 

For those customers who are able to run their stocks to zero a tank clean to remove excess dirt and sludge may be a good idea.  We can recommend tank cleaning companies if this is of interest. 

As we approach this deadline, our sales advisors will be happy to discuss your requirements leading up to 1^st April to help manage this transition as smoothly and efficiently as possible. 

3.       Security 

Those customers who will be storing larger quantities of white diesel should ensure that their premises are secure to mitigate the risk of theft. Tank monitoring or telemetry systems are also available to alert you to any unusual patterns of fuel movement.

Help and support

Here at Allan Stobart Lubricants & Fuels we want to support our customers through this period of transition to ensure we achieve this deadline with minimal disruption to your business. Our trusted advisors will be happy to answer any questions you may have about these changes or if you would like to discuss tank telemetry, tank cleaning or greener fuels such as HVO.  Simply contact us at adminoffice@allanstobart.co.uk or 016974 76575

Here is a link to the Government website ("Gov UK – Reform of red diesel and other rebated fuels entitlement”) which sets out these changes in more detail:

https://www.gov.uk/government/publications/reform-of-red-diesel-entitlements/reform-of-red-diesel-and-other-rebated-fuels-entitlement