The October 2021 Budget confirmed that from April 2022, further restrictions will be imposed on the entitlement to use duty-rebated red diesel.

The main change relevant to the countryside is that it will no longer be legal to use red diesel in machinery used in construction. This may impact farmers. Although agricultural work will remain a key permitted use for red diesel, anyone in the industry seeking to supplement their income by using equipment for construction work must completely replace its fuel supply with non-rebated white diesel.

The National Association of Agricultural Contractors has said that it is seeking clarification from HMRC on how operators of machinery are expected to manage any switching between red and white diesel. HMRC has suggested that every trace of red diesel must be removed from the vehicle when making the switch.

The new rules restrict the use of red diesel to the following purposes:

  • For vehicles and machinery used in agriculture, horticulture, fish farming and forestry. This includes allowing vehicles used for agriculture to be used for cutting verges and hedges, snow clearance and gritting roads;
  • To propel passenger, freight or maintenance vehicles designed to run on rail tracks;
  • For heating and electricity generation in non-commercial premises - this includes the heating of homes and buildings such as places of worship, hospitals and townhalls; off-grid power generation; and non-propulsion uses on permanently-moored houseboats;
  • For maintaining community amateur sports clubs as well as golf courses (including activities such as ground maintenance, and the heating and lighting of clubhouses, changing rooms etc.);
  • As fuel for all marine craft refuelling and operating in the UK (including fishing and water freight industries), except for propelling private pleasure craft in Northern Ireland;
  • For powering the machinery (including caravans) of travelling fairs and circuses.

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