RED IS DEAD – This WILL affect you – Diesel, Another Cost Increase

Construction and Diesel Powered Plant Cost Hike

With Red Diesel, we are not just talking about a colour here; we are talking about taxation. And whilst the world needs immediate action to stave off the filthy hangover of capitalism and industrialisation, such action comes with expense. No holds barred here…on your marks, get set…PAY THROUGH YOUR NOSE FOR SOMETHING ELSE!

Here comes the news bit: It comes to light as part of the UK governments continued commitment to reduce its part in rising global warming levels and achieve net-zero carbon emissions by 2050. Research from a recent government report states that the ‘use of red diesel accounts for around 15 per cent of all the diesel used in the UK and contributes to nearly 14 million tonnes of carbon dioxide a year’ so whilst this change is great news for the environment, many construction workers have been left wondering how they will be affected by this new law, and how they should act in order to comply with the new rules.

How you will need to comply?

This major change will impact many businesses across the UK, primarily those in the agriculture, construction, and waste industry. Meaning that hired in equipment will need strict management in terms of the fuel used, with the potential for fines if hirers have used illegal fuel.

The government has released clear guidelines that specifies who can still use red diesel and in which applications. But one of the main changes for the construction industry is the fact that heavy plant and equipment will no longer be able to run on red diesel when used for construction purposes.

Note that this does include non-road mobile machinery for example excavators, dumpers and cranes.

The new law will also mean that the construction industry cannot use red diesel to run commercial heating and power generation, for example when using mobile generators on construction sites.

The HMRC have said that they will be offering guidance and highlight the importance of record-keeping as a means of evidence for compliance. For example, keeping invoices and receipts that show the dates of red diesel purchased prior to the deadline date, and records of white diesel purchases from the deadline onwards will suffice.

Primary equipment where red diesel is used:

  • Excavators
  • Rollers
  • Generators
  • Waste Separation Machines
  • Diesel Heaters
  • Mobile Self Container Tower Lights

What to do with existing red diesel?

You may be wondering; do I need to empty out all of my red diesel right now?

The answer is no.

In order to be compliant with the new guidance, you must run down your existing stocks of red diesel before the deadline – 1st April 2022. Realistically, there will still be some traces left and you don’t have to go flushing your tanks, however you do need to prove that you haven’t purchased any red diesel after the deadline (or even stocked up prior to this date).

HECK, THAT’S GONNA COST YOU!

If you hire equipment powered by diesel. Sending it back filled with red diesel would be a very bad mistake. You could find yourself subject to a drainage and refill charge. We know these start at £150 plus the VATJUST FOR THE DRAINAGE – That’s BEFORE some nice yummy fully duty laden white diesel or equivalent.

Highway Robbery or Necessary Green Tree Huggery – What do you think?

How will the change affect business?

Unfortunately for many construction companies across the UK, this change will mean a surge in their running costs. Red diesel, which is dyed white diesel, so it is easily identifiable, is taxed at a much lower rate. The fuel duty for red diesel is 46.81 pence per litre, far less than standard white diesel which is taxed at a full rate of 57.95 pence per litre. This means that companies who have to switch from red diesel to white diesel next year will have to pay five times as much fuel duty than they did previously.

Put into pounds and bought in bulk, this value adds up quickly and will start to eat in to profit margins quite drastically. Many construction firms will have to find new, more efficient ways to ensure that these costs do not directly affect their bottom line.

Equipment Costs are likely to rise too, with companies in this sector also having to consider the one-off costs of staying compliant. For example, having to purchase additional fuel storage tanks, new equipment and sourcing reliable alternative fuel.

It’s also worth mentioning that red and white diesel will now become an attractive target for theft, following the new legislation announcement. Which is not ideal for construction companies, whose sites are already venerable with the high numbers of vehicles and equipment often left onsite every night. Thanks to modern technology, smart tanks and locks can help to keep your fuel secure whilst you’re away.

What are your thoughts? Email our team hello@toolkitonline.co.uk to have your say, or register to comment below.

Leave a Comment
Article Categories