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    Red diesel in the uk:
    Switching to alternatives

    From 1st April 2022, changes will be imposed regarding the taxation of red diesel in the UK. These changes were originally announced during the March 2021 Budget, delivered by Chancellor of the Exchequer, Rishi Sunak. 

    The key changes include the withdrawal of tax relief on the use of red diesel among certain user groups and industry sectors. But what implications might this have for you and your business?

    what is
    Red diesel?

    Red diesel is a gas oil motor fuel, often used for heavy equipment and off-road vehicles. It functions exactly the same as the regular diesel you might buy from a petrol station (also known as white diesel). The only difference is that the fuel is blended with a red dye and certain chemical markers that give it its distinct colour and allow it to be traced. These chemicals and dye do not affect the functionality of the diesel in any way.

    Red diesel is a rebated fuel and, as such, is taxed at a lower rate than regular white diesel. Because of this, it cannot be employed for everyday use, nor can it be used for vehicles travelling on public roads, except for in strictly regulated circumstances.

    who uses
    red diesel?

    Red diesel is currently used in a number of industries and sectors to power machinery and fuel off-road vehicles. These include (but are not limited to) agriculture and farming, forestry and horticulture, fish farming, construction, manufacturing, and mining. 

    Key parts of the UK's infrastructure, such as hospitals and data centres are also permitted to use red diesel to power their backup generators in the event of a power cut.

    Whilst most red diesel in the UK is used as fuel for off-road vehicles such as tractors, cranes, and forklifts, it also serves as a heating fuel for industrial and commercial buildings, as well as fuel for trains, commercial boats, and the travelling circus and fairground industry.

    Red diesel does have some non-commercial uses. Golf clubs and amateur sports clubs are permitted to use it for heating, lighting, and maintenance, so long as they are properly registered as a CASC (Community Amateur Sports Club). It is also used for power generation for homes that are not linked to the National Grid and require their own generator to produce electricity.

    changes to
    red diesel taxation

    At the 2020 Budget, the government announced that red diesel entitlement was being removed from most industry sectors moving forward, with the exception of agriculture, fisheries, horticulture, and farming. 

    During a consultation period, the government decided to allow non-commercial boats (private pleasure craft) to use red diesel for heating purposes, but not propulsion, with owners expected to pay the difference in taxation to their supplier. These terms were formally announced at the March 2020 budget, together with the cut-off date for red diesel use of 1st April 2022.

    Why Have These Changes Come Into Force?

    The change to red diesel entitlement is part of the government’s commitment to reduce the country’s reliance on fossil fuels. The significant difference in tax between red and white diesel, as well as non-fossil fuel alternatives such as HVO, means there is little incentive for commercial and industrial companies to go green. Those sectors that retain their entitlement have done so because of their importance to the economy and the British food supply chain.

    What Do These Changes Mean For Your Business?

    The answer to this question depends entirely on the nature of your business, the sector to which it belongs, and how much it relies on gas oil to operate. If your remit still falls within the broad definition of agriculture, horticulture, fisheries, and farming, then you can carry on as normal, making your usual orders for red diesel and using it accordingly.

    For other sectors, such as construction, manufacturing, mining, and transport, you will no longer be able to use red diesel with immediate effect from 1st April 2022. The main impact on this will be an increase in your fuel and gas oil costs. The fuel duty for white diesel is currently more than five times that of red diesel, which means many companies can expect cost increases in the tens of thousands of pounds over the course of a year.

    In addition, there is no grace period in which you can use your existing stock of red diesel. The government has advised that all users who are losing their entitlement to red diesel in April should run down their current supply of fuel ahead of the cut-off date.

    Likewise, the government has recommended that companies storing their own red diesel on-site should thoroughly clean and flush out both their storage tanks and supply lines, to ensure there is no trace of the red diesel fuel or its tracking chemicals, to prevent the possibility of misidentification should they be inspected by officials at a later date.

    what are the alternatives to
    red diesel?

    If your company or organisation is no longer able to use tax-exempt red diesel, there are several options available to you. These include switching to white diesel, using an alternative, renewable fuel such as HVO, or changing your power infrastructure to a non-diesel model.

    converting to white diesel

    Perhaps the most obvious solution – once you have emptied and cleaned your red diesel storage tanks – is simply to convert to white diesel. After all, your vehicles and machinery are already conditioned to accept the fuel. There are two main issues with this approach. Firstly, the cost is going to be much higher, as we have discussed. Secondly, switching from red diesel to white diesel does nothing to reduce your carbon footprint or benefit the environment.

    converting to HVO

    HVO (hydrotreated vegetable oil) is one of the cleanest fuels currently on the market and is a well-regarded alternative to red and white diesel. It meets all EN 15940 regulatory standards as well as the Fuel Quality Directive 2009/30/EC Annex II. What this means in practical terms is that it can be used as a substitute for mineral diesel without having to change your machinery or infrastructure.

    There are many additional benefits to HVO, including:

    • Reduction of greenhouse gas emissions: studies have shown that emissions from HVO are up to 90% less than those of diesel

    • A non-toxic, renewable, and biodegradable fuel source

    • Improved storage life: HVO can last for as long as 10 years in storage and requires less regular testing

    • Improves corporate social responsibility thanks to its environmental benefits

    • Year-round performance: HVO still works at high performance even in cold weather

    converting to an electrified power infrastructure

    This is a major undertaking for any company, but one that may be worth considering now, if it was always a part of your plans for the near future. Changing your infrastructure to an all-electric model will require considerable investment in new machinery, a dedicated high-voltage power supply, and the appropriate method of generation. In the long run, this may well be a sound investment, as you will be ready to face the challenge of a fossil-fuel-free future. However, in the interim it may not be economically achievable short term, and will likely require a significant amount of time to plan and implement.

    What storage solutions are available
    for diesel?

    Whether you favour white diesel or HVO, storage tanks come in a range of sizes and shapes, including drums, bowsers and bunded tanks.

    Browse all diesel tanks

    Diesel tanks can be fitted above or below ground and are available in a range of materials – the most common being plastic and steel. Some of the most popular types of diesel and HVO storage tanks include:

    drum & cylindrical diesel tanks

    A drum diesel tank is exactly what it sounds like – a cylindrical tank used for storing various types of gas oil. These are available in a variety of sizes and remain static on your site. To refill them, you call out a gas oil company to deliver a shipment, pumping it into your drum from their mobile tanker.

    Bowser diesel tanks

    A fuel bowser is a mobile form of diesel storage, normally mounted to a wheeled rack. It can be attached to a vehicle to be transported from one place to another so it can be filled by the owner. A good choice for smaller enterprises who need a quick and convenient way to move fuel across their site.

    Bunded diesel tanks

    Bunded diesel tanks and fuel storage tanks incorporate a simple, but effective safety feature – a double tank wall that serves as a secondary containment barrier. If there is a leak in the inner tank, any diesel or HVO will be held in place by the outer tank (or bund). This prevents the leaking of toxic material into the local environment, polluting the soil and water table.

    plastic diesel tanks

    Most plastic diesel storage tanks and HVO storage tanks are made from polyethylene – a highly durable, non-reactive, and recyclable material. Lightweight, robust, and cost-effective, plastic oil tanks are rapidly replacing their steel counterparts across the UK.

    steel diesel tanks

    While steel fuel tanks are usually more expensive than comparatively sized plastic tanks, they do offer some advantages. Since they are fabricated, rather than moulded, they can be built to any size and shape, which makes them a popular choice for businesses looking for a replacement HVO tank that will fit the same specifications as their existing unit.

    diesel dispensing tanks

    For refuelling vehicles, machinery or equipment on-site diesel dispensing tanks provide a safe, convenient and efficient solution. A dispensing tank enables fuel to be delivered and stored, while hosing and nozzles allow for fast dispensing of fuel. These tanks are available in a wide range of sizes including portable tanks, as well as high capacity fuel points that typically offer a comprehensive range of features.

    moving forward with
    fuel storage

    However you decide to move on with your company’s gas oil requirements after 1st April 2022, it’s important to get your changes in place now. There’s no sense waiting for the cut-off date to roll around, only to find you have no contingency plan to rely upon.

    If you are unsure about the fuel storage and management solutions that you require, contact Northern Tank Store to discuss the options available. With decades of combined experience in the sector, access to a wide range of market leading products and facilities to design and manufacture bespoke solutions, our team will help you achieve the best fuel storage solution for your needs.


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