'rebated' red diesel

VAT changes from 1 April 2022: Use of ‘rebated’ red diesel is much more restricted

The use of ‘rebated’ red diesel (5% VAT) is restricted to a very small number of industry sectors (including agriculture, horticulture, fish farming, forestry and rail transport).


HMRC says that businesses within certain sectors (i.e. construction, mining and quarrying, ports, manufacturing haulage for transport refrigeration units on lorries, road maintenance, airport operations, oil and gas extraction, plant hire, logistics and waste management) will no longer be able to use red diesel.


If a business uses red diesel, it will need to consider the impact of switching to higher cost fuel and in particular with the further increase to the cost of fuel we are all facing. Reviewing existing contracts within the business’ supply chain may need updating to reflect the change.


Within the Spring Statement, the Chancellor announced to reduce fuel duty by 5p per litre from 6pm on 23 March 2022 until April 2023, which should help further with costs.


What next?

If you have any questions about the restriction of ‘rebated’ red diesel, please contact Sandy Cochrane.

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