Red diesel

The measure

At Budget 2020 the government announced it will remove the entitlement to red diesel and rebated biofuels from April 2022, except for use in specific circumstances (i.e. use in agriculture, rail vehicles and non-commercial heating).

The government has now published a summary of responses to last year’s consultation and set out next steps on these tax changes, including further exceptions where red diesel is used for the following purposes:

• to power vessels for commercial purposes, including fishing and water freight, travelling funfairs and circuses, amateur sports clubs as well as golf courses; and

• non-commercial power generation.


Who will be affected?

Businesses and individuals currently entitled to supply or use rebated gas oil (red diesel) and rebated biofuels.


When will the measure come into effect?

The measure will take effect from April 2022.

Our view

The measure has been announced in an attempt to ensure businesses pay for the emissions they produce, and to incentivise the adoption of green alternatives.

The government consulted on the measure announced within Budget 2020 to identify whether it had overlooked any further exceptions to this measure. The additional exceptions highlighted within Budget 2021 are a result of this consultation.

Businesses using red diesel or rebated biofuels for uses other than those categorised as exempt will have until April 2022 to assess alternative options.