Rebated diesel and biofuels

The measure

Motor and heating fuels are liable to fuel duty, with only fuel taxed at the full rate of fuel duty allowed to be used in road vehicles. Some oils and fuels are taxed at a lower (rebated) rate because fuel duty was intended to be a tax on road vehicles. This includes gas oil (diesel) which is chemically marked and dyed to enable law enforcement agencies to identify it as rebated fuel and detect when the inappropriate sort of diesel is being used, providing a deterrent to fuel fraud.

At Budget 2020, the government announced that it would remove the entitlement to use rebated diesel and biofuels from most sectors from 1 April 2022 to help meet its climate change and air quality targets. Following consultation in 2020, the sectors that will be allowed to continue to use rebated diesel and biofuels beyond 1 April 2022 were confirmed at Spring Budget 2021, with changes legislated for in Finance Act 2021.

The government today announced a number of further technical amendments to these changes concerning the entitlement to use rebated (red) diesel and biofuels, including marked oils, from 1 April 2022.


Who will be affected?

Businesses and individuals that currently supply or use rebated diesel and biofuels, including marked oils.


When will the measure come into effect?

The government will legislate in Finance Bill 2021-22 to make technical amendments to the legislation that restricts use of rebated (red) diesel and rebated biofuels from 1 April 2022.

Our view

The overall tax changes had been previously announced and with these further tweaks they should ensure that most current users of rebated diesel use fuel taxed at the standard rate for diesel from 1 April 2022, like motorists, which could be said to more fairly reflect the impact of the emissions they produce.