The Transition from Red Diesel- What you need to know in the construction sector
If you are involved in the construction industry, you may have heard about the transition from rebate diesel usage. But if you haven’t already, it is time that you begin your preparations for April 2022, so you can avoid any unnecessary implications. Since the first announcement of this change back in March 2021, there was a lot of confusion around which UK businesses this would affect, especially in the construction sector. Nevertheless, to help you understand the whole situation, discover your eligibility, and prepare for the big change ahead, we have put together this resource to help.
As of April 2022, red diesel will no longer be available at a rebated rate for the vast majority of commercial applications. Which, for some businesses, is a massive concern, especially in the construction industry. Since the initial government announcement, there has been a lot of obscurity around some applications involved in our construction sector. Therefore, if you haven’t already considered whether you are eligible to continue using rebated fuel within your company, now is the time to act. This ensures that you remain in compliance with the forthcoming changes, continue growing your business, and avoid any unnecessary fines.
Why the construction industry can no longer use rebated diesel?
The restriction of the use of rebated diesel doesn’t just affect the construction industry. It affects a long list of businesses throughout the UK. Meaning that thousands of business sectors around the country will lose their ability to use red diesel. This decision from the government is an effort to meet carbon reduction and air quality targets.
The UK government is intending to do this by:
- Start charging standard tax on the majority of rebated fuel users to reflect the overall impact of the emissions in each business sector.
- Promote energy efficiency as white diesel performs better than rebated, particularly in the use of heating.
- Help promote cleaner alternative fuels such as fossil fuel HVO or electric alternatives. Note, duty will also increase on biodiesel, bio blends and fuel substitutes.
What does this mean financially for your construction business?
The movement from rebated red diesel to white or alternative fuel will have a huge effect on the running costs of machinery within your business. Currently, red diesel attracts a rebate of 46.81p per litre, giving it an effective duty rate of 11.14ppl. With the new government guideline of a direct switch from red to white diesel, construction companies will incur an additional 46.81p per litre. Put more simply: A 14 Ton excavator holding 260 litres of fuel currently cost your business around £28.96 fill. With the new government laws based on white diesel, the same fuel tank will cost an additional £121.71. This huge increase in the cost of running your machinery could cause issues with cash flow within your business.
What do construction industry professionals need to know? What can you do to save?
The biggest change that professionals will face is the cost of operating their equipment. This could be excavators, dumpers, telehandlers, cranes, welfare units etc. Of which currently run on red diesel. However, there are two immediate things that businesses within the construction industry to help themselves:
Changing to ultra-low carbon fuels- switching to an alternative fuel that could reduce your overheads. The substantial increase in red diesel costs makes these cleaner fuels more competitively priced.
Investing in the latest equipment – Choosing the latest most fuel-efficient equipment to make every penny count.
It is important to note that permissions apply not to types of equipment, but to their specific uses. All of which are highlighted in the government guidelines of the transition from red diesel here. (https://www.gov.uk/government/publications/reform-of-red-diesel-entitlements/reform-of-red-diesel-and-other-rebated-fuels-entitlement)
How to stay compliant with the red diesel transition
The construction industry is required to use or remove all of its red diesel before the April 2022 deadline. The government does not require companies to flush or renew their tanks to remove all traces of the red dye from their system. However, it is important to prove to HMRC auditors that no red diesel has been purchased after this point. Expect to be asked to provide purchase and usage volumes of any red diesel after April 2022.
What are the proposed implications if found using red diesel after April 2022
The government has stated that they will be performing on-site spot checks within the construction industry to ensure that the new law is being enforced. If you are not authorised or are eligible to use red diesel in your machinery after April 2022, you will be subject to significant monetary fines and potentially having your equipment seized.
What to do now to protect your business
If you haven’t already read the government guidelines for the transition from red diesel, then we would highly recommend you do so. (https://www.gov.uk/government/publications/reform-of-red-diesel-entitlements/reform-of-red-diesel-and-other-rebated-fuels-entitlement)
At WHC Hire Services, we are proud to have already transitioned to alternative fuel sources for all of our plant equipment. This guarantees that all of our equipment, when delivered, is not only in perfect working condition but is compliant with the latest government law. If you are looking to hire some of the most fuel-efficient plant machinery available on the market, then speak to one of our dedicated team to help. With continuous investment into the latest technology and quality of our fleet, we are able to provide some of the highest quality machinery on the market. With depots in Tewkesbury, Worcester and the Cotswolds which service the whole UK, we are available on hand when you need help. You can view our entire plant range here, or call us on 01684377977.