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Sara Dennis, Director at Bevan Buckland LLP

Hard-hit construction and manufacturing firms will be hit hard by the imminent ban for many of them on using red diesel, which will see them having to pay five times as much fuel duty.

Leading Wales-based accountancy firm, Bevan Buckland LLP, is urging firms in Wales to act swiftly to take the significant incoming running costs into account when making plans and forecasts. From 1 April 2022, many sectors will lose their entitlement to use red diesel and rebated biodiesel across a range of applications – and construction is one of the industries most affected.

Sara Dennis, Director at Bevan Buckland LLP, said: “Red diesel is taxed at a much lower rate than white diesel. This rebated red fuel was introduced as a concession for some industrial users in off-highway applications because fuel duty was mainly intended to be a tax on on-road vehicles. However, changes to this regime were announced by the UK Government during Budget 2020 as part of the drive to achieve net-zero carbon emissions by 2050. After the April 2022 deadline, most users of red diesel will have to switch to white. Taxing most users at the full rate is designed to promote the use of cleaner alternatives. This might be good news for the environment but many in the construction industry are confused about whether they will be affected by the changes, how they should comply with the rules and, of course, how they are going to afford this hike in  running costs at a time when construction and manufacturing are under great financial strain.”

Currently, ordinary white diesel is taxed at the full rate of 57.95p per litre. Red diesel is entitled to a rebate of 46.81ppl, so it is effectively taxed at only 11.14ppl. So the hike in cost is significant and the changes will bring with them added one-off adjustment costs to businesses, too. Government guidelines specify who can continue to use red diesel and in what circumstances, but heavy plant and equipment will no longer be able to run on red diesel when used for construction purposes. So, this includes all non-road mobile machinery, like cranes, diggers and dumpers. The construction industry will no longer be able to use red diesel for commercial heating and power generation – so for mobile generators on sites. However, certain industries that also use gas oil heavily, such as agriculture, rail, commercial fishing fleets and non-commercial heating or power generation uses, will be exempt. Red diesel permissions apply to the way in which equipment is used, not to the type of equipment itself. So, those diggers and cranes will be able to run on red diesel if used in an agricultural setting.

Sara adds: “These changes are going to bring pain to a widespread of industries, including quarrying, leisure, ports, oil and gas extraction, waste management, commercial heating and more. We would urge businesses to check the Government guidelines at and, if you are affected you must run down your existing stocks of red diesel before the 1 April deadline, you must not buy more or stockpile after this deadline, you should draft a timeline of usage to predict when you will run out, and have a plan for integrating fuel replacements. It is vital that you save your invoices, too. You will need to have purchasing and delivery documentation available to provide HMRC inspectors with a clear audit trail on request. Operators will be acutely aware that red and white diesel will become even more attractive targets for thieves, so businesses may have to put extra security measures in place and this will have a cost implication.”

Bevan Buckland LLP is the largest independent accountancy practice in Wales providing practical support and strategic accounting and tax advice for small to medium-sized businesses. Headquartered in Swansea, the firm has offices in Cowbridge, Carmarthen, Pembroke, Haverfordwest and St David’s.

For further information on this topic contact Bevan Buckland LLP on 01792 410100 or email