REBATED FUEL CHANGES

You may have already been made aware there are major changes on the horizon within the petroleum industry regarding rebate entitlements on certain fuels.

 

As of 1st April 2022, the Government have introduced legislation to stop fuel duty rebates for certain industries which they consider to be the main contributors towards harmful greenhouse gas emissions, resulting it in being labelled as a “Green Tax”.

 

The changes will primarily affect construction and commercial industries that rely on Red Diesel (Gas Oil) to power machinery, plant, or generators for commercial use.

 

Red Diesel is currently entitled to a rebate of 46.81p compared to the standard road-use White Diesel. The tax changes will ensure that a large proportion of fuel users will now be required to purchase fuel taxed at the full rate i.e. White Diesel.

 

Understandably, this creates major cost issues for both you as an end-user, and us as a plant hire company reliant on our RDCO fuel supplier network.

 

As a company, Stuart Power intend to commence implementation of our revised company policy as of 1st March 2022; It is our intention to recharge the replenishment of DERV (Diesel Engine Road Vehicle) to our customers at cost plus 20%. This new recharge value will affect both new and existing fuel agreements.  

                                                                                                                                                                                                                                                        At this stage we are not looking to reduce any of our customers’ credit terms, however we envisage there will need to be discussions throughout the transition for those customers whose limits cannot sustain the duty and VAT increases.

 

Alternative fuels such as Green D+ HVO & Shell GTL are starting to become more readily available and we are working closely with our suppliers and the producers of these products to help our customers get started on their green journey to become more environmentally friendly.

 

There is NO tax relief on HVO fuel for those industries that are set to lose the entitlement to rebated fuels, and we do not expect this to change before the deadline or at any point in the future.

 

HMRC have confirmed that end-users who switch from Red Diesel to White Diesel are not required to flush out their tanks, however customers are advised to run stocks to as close as zero (or as low as is practically possible) by 31st March 2022, in order to achieve a relatively clean switch over from Red to White.

 

Stuart Power would like to take this opportunity to thank all of our customers for their support over the years, and I hope that we can all get through this period of change as smoothly as possible, with many more successful years working together ahead of us.

INTERIM GUIDANCE ON HMRC CHANGES TO RED DIESEL &
OTHER REBATED FUELS FROM 1ST APRIL 2022
Overview
From 1st April 2022, most machines, vehicles, and appliances will no longer be allowed to
use rebated (red) diesel and rebated biofuels. From this date, the current approach of
allowing rebated diesel and biofuels to be used in any machine that is not a road vehicle
(including certain types of vehicles used mainly off-road) will end. Instead, rebated fuel use
will be limited to certain vehicles, vessels, machines, and appliances when used for specific
purposes.
Those no longer allowed to use rebated fuel in diesel-powered vehicles, machines and
appliances will be required to use diesel or biofuels on which the full rate of fuel duty has
been paid.
The rebated fuels affected by these changes are rebated (red) diesel, rebated Hydrotreated
Vegetable Oil (HVO), rebated biodiesel and bio blend, and fuel substitutes. HVO is a liquid
hydrocarbon which is classified for excise purposes as heavy oil and treated the same as
diesel.
Biodiesel, bio blend and fuel substitutes are already subject to fuel duty when they are set
aside to be used in an engine, motor, or machine. From 1st April 2022, they will also be
liable to fuel duty if they are used for heating purposes. The rebated rate of fuel duty will
apply when they are used for non-commercial heating, and the full rate of fuel duty will
apply when they are used for commercial heating.
This guidance will be reviewed in the run up to the introduction of the changes and
amended as necessary. This may include further legislative changes (including, in particular,
secondary legislation to be laid in spring 2022).

When Can Rebated Fuel be Used from 1st April 2022?
From 1st April 2022, rebated fuel can only be used in certain vehicles, vessels, machines, or
appliances for allowed uses. These allowed uses are set out at (a) to (f) below.
(a) Agriculture, horticulture, fish farming and forestry
You will be able to use rebated fuel in agricultural vehicles, special vehicles, unlicensed
vehicles, machines, or appliances used for accepted purposes within these sectors.
Accepted purposes are explained within the Memorandum of Agreement at section 9 of
Excise Notice 75: Fuels for use in vehicles. This notice will be replaced for April 2022, but
purposes relating to these sectors will be unchanged. More details about the definitions are
also set out under Definition of a vehicle, machine, or appliance below.
You can also use rebated fuel in agricultural vehicles when cutting verges and hedges that
border a road; and for snow clearance, gritting and assisting any clear-up following flooding.
With the exception of unlicensed vehicles, use of rebated fuel as set out above includes
travel on roads to and from the place where the vehicle is used only for those purposes.
Where a vehicle or machine allowed to use rebated fuel for these purposes is transported
by another vehicle, you can only use rebated fuel in the vehicle carrying or towing it if it also
qualifies in its own right.
If you use rebated fuel in agricultural vehicles, machines and appliances for purposes
relating to agriculture, horticulture, fish farming or forestry, you will also be able to use
them for any other purpose on private land where they are ordinarily kept.
(b) Rail transport
You can use rebated fuel to propel and stop a vehicle or machine designed to run on a
railway, but not on a tramway. You cannot use rebated fuel to power other machines or
equipment used on a railway, such as cooling or heating units in railway freight wagons.
Where a vehicle, machine or appliance uses the same fuel tank for both allowed and nonallowed
uses, you will have to use fully duty-paid diesel / biofuels from 1st April 2022. Find
more information below in A vehicle, machine or appliance used for both allowed and nonallowed
purposes.
(c) Fuel used for non-commercial purposes - electricity generation and heating
You can use rebated fuel for electricity generation for, and heating of, premises that are not
being used for commercial purposes.
Non-commercial purposes can include premises being used to provide a public service that
is not for a fee or for charitable fundraising.
You cannot use rebated fuel where premises are being used for the purpose of making a
profit, for example a school or hospital that charges fees, as the premises would be used for
commercial purposes.
You can use rebated fuel for electricity generation for homes and other premises being used
for non- commercial purposes, including those that use back-up generators to ensure a
continuous electricity supply.
You can use rebated fuel for heating premises being used for non-commercial purposes,
including, for example, domestic homes, places of worship, NHS hospitals and townhalls.
(d) Community amateur sports clubs (CASCs) and golf courses
You can use rebated fuel in agricultural vehicles and unlicensed vehicles kept and used on
land maintained by a CASC or on a golf course or golf driving range.
You can use rebated fuel in any machines or appliances (other than vehicles) while being
used at these clubs, courses, or ranges, including for heating and lighting of buildings such
as clubhouses and changing rooms.
While working on these grounds, you can use rebated fuel in special vehicles, such as
diggers, cranes, and mowing machines. You can also use rebated fuel in special vehicles
when that vehicle is going to or from a golf course or land maintained by a CASC where the
vehicle is to be, or has been, used.
A CASC means a club which is registered as a community amateur sports club as defined in
section 658 of the Corporation Tax Act 2010. If you are not already registered as a CASC, you
can find guidance here.
Where the land or golf course is either side of a public road, you can use rebated fuel in an
agricultural or special vehicle while travelling between the two parts by the shortest
possible route, providing the vehicle is licensed to use the road.
(e) Sailing, boating and marine transport (excluding private pleasure craft in Northern
Ireland)
With the exception of private pleasure craft in Northern Ireland, you can use rebated fuel in
all types of boat. This includes in their engines and in other machines and appliances
permanently on the boat.
Since 1st October 2021, you have not been able to put rebated fuel into the tank that
supplies the engine used to propel a private pleasure craft in Northern Ireland. For more
information about private pleasure craft and the changes in Northern Ireland, see Excise
Notice 554.
(f) Travelling fairs and travelling circuses
You can use rebated fuel in machines and appliances associated with a travelling fair or
travelling circus. A travelling fair or travelling circus is one that can be dismantled at least
once year and can travel from place to place. A more detailed explanation will be set out in
the public notice ahead of the implementation date.
You can use rebated diesel to power the rides, for providing electricity for, and heating of,
the accommodation caravans, in mowing machines or unlicensed vehicles, but not in any
road vehicle.
(g) Definition of a vehicle, machine, or appliance
An agricultural vehicle is one of the following:
- a tractor
- a single seat, light vehicle (less than 1,000 kilograms), designed and constructed mainly for
off-road use
- a vehicle licensed only for use between different parts of land for purposes relating to
agriculture, horticulture, or forestry
- a vehicle constructed and adapted, for example with built-in or permanently attached
handling and processing equipment, to be used for purposes relating to agriculture,
horticulture, fish farming or forestry
A special vehicle is a vehicle designed, constructed, and used as set out in Part 4 of Schedule
1 to the Vehicle Excise and Registration Act 1994, but without any weight restriction. The
types of vehicles that fall within that legislation are:
- digging machines
- mobile cranes
- mobile pumping vehicles
- work trucks
- road rollers
A mowing machine is a vehicle or machine designed only for mowing grass.
An unlicensed vehicle is a vehicle not kept or used on public roads, and for which a statutory
off-road notification (SORN), if required, has been made to the Driver and Vehicle Licensing
Agency.
A machine or appliance that is not a vehicle or vessel and is used for an allowed use also
includes non-road mobile machinery.
Preparing for 1st April 2022 – Fuel Users
From 1st April 2022 you must not put rebated fuel into the tank of a vehicle, vessel,
machine, or appliance that is not allowed to use it. If you are no longer able to use rebated
fuel, you should plan to run down the fuel in your vehicles, machines, or appliances to as
close to nil as reasonably practicable before 1st April 2022.
You may use rebated fuel as fuel other than for an excepted machine after 1st April 2022 if:
- it was taken into the vehicle, vessel, machine, or appliance legally in the UK before 1st April
2022 (i.e., the vehicle, vessel, machine or appliance and the purpose it continues to be used
for means it was allowed to use rebated fuel before the rules changed); and
- no rebated fuel has been taken into the vehicle, vessel, machine, or appliance on or after
1st April 2022
Rebated fuel in storage tanks
If you are no longer going to be allowed to use rebated fuel from 1st April 2022 as a result of
these changes, you should plan to use up stocks of fuel held in storage by this date. You will
not be expected to flush out rebated fuel from your storage tanks.
You may need to review your weekly or monthly usage to determine how much rebated fuel
you are likely to use by 31st March 2022, and plan how to manage any surplus stock. If you
order supplies of rebated fuel between now and 1st April 2022 you should only order the
amount you expect to use by that date. You should use fully duty-paid diesel or fully dutypaid
biofuels when putting fuel into your vehicle or machine after the rules change on 1st
April 2022.
Find more information below on rebated fuel held in storage tanks and used for contingency
back-up electricity generation and critical safety or environmental protection equipment
used in commercial premises.
If you have any surplus rebated fuel in your storage tanks after 31st March 2022, you will
need to:
- sell or give it to someone who is allowed to use it
- sell or give it to any Registered Dealer in Controlled Oil (RDCO)
- dispose of it via an approved waste oil recycling or disposal company
You will need to keep a record of how and when the fuel was disposed of, or who it was sold
to and when. You can sell or otherwise dispose of the surplus fuel as above without needing
to be approved by HMRC as an RDCO.
You should ensure that any disposal of surplus rebated fuel not used before the rules
change is undertaken correctly and safely through an approved waste oil recycling or
disposal company.
If you have a large volume of rebated diesel already in reserve and are concerned that you
will not be able to use or dispose of it before 1st April 2022, you should contact
oils.policymail@hmrc.gov.uk, ideally by 30th November 2021.
Preparing for 1st April 2022 – Registered Dealers in Controlled Oil
From 1st April 2022, customers currently eligible to use rebated fuel must not put rebated
fuel into a vehicle, vessel, machine, or appliance for a use that is no longer allowed.
Although the use of rebated fuel will be significantly restricted from 1st April 2022, your
responsibility as an RDCO is not changing. You will still need to take all necessary
precautions to ensure that you supply rebated fuel only to people who will use it as
permitted. You need to familiarise yourself with the changes and establish which customers
will be affected. You also need to take care not to supply more rebated fuel than a customer
no longer allowed to use it may realistically use before the rules change.
Affected users will need to run down their stocks of rebated fuel in the months leading up
to the changes and not put any more into their vehicles, machines or appliances after the
rules change. You will need to ensure your customers understand the changes to the rules
and help them to prepare by discussing their needs between now and 1st April 2022. This
will help your customers to manage down their supplies so that they are not left with
surplus rebated fuel in their storage tanks on 1st April 2022.
Where a customer who will no longer be allowed to use rebated diesel after 1st April 2022:
- suggests stockpiling rebated fuel
- begins purchasing above their normal amounts, or
- places a larger than normal order before April 2022
you should discuss this with them and direct them to Preparing for 1st April 2022 – Fuel users.
You will need to be able to demonstrate you have taken reasonable care to ensure that you
have supplied rebated fuel only to customers still allowed to use it.
If you supply rebated fuel before 1st April 2022 knowing, or having sufficient reason to
believe, it will be put to a use that is no longer permitted after these changes, you will not
have met your obligations as an RDCO. This includes where, based on normal supply rates, a
user is unlikely to use the volume of fuel they order in the remaining time before 1st April
2022.
As a result of the change in demand from rebated to fully duty-paid diesel or fully duty-paid
biofuels, you may need to reassign your storage tanks. If you do, they will need to be
flushed out to remove all traces of fuel markers. You should keep a record of this being
done and keep receipts/invoices if you employ someone to do it. As there may be increased
demand for these services in the run up to April 2022, you should consider organising this in
advance of April.
If you will no longer be supplying rebated fuel as a result of these changes, you will need to
deregister from the RDCO scheme. You will also need to tell us how you plan to dispose of
any stocks of rebated fuel and keep the relevant records to demonstrate how you disposed
of it. Find more information on how to deregister in Excise Notice 192 - Registered dealers in
controlled oil.
A vehicle, machine or appliance used for both allowed and non-allowed purposes
You must not put rebated fuel in a vehicle, machine or appliance for a use no longer allowed
after the rules change.
If you use a vehicle, machine or appliance which is used for both allowed and non-allowed
purposes after the rules change, you will need to make a decision on how you manage the
fuel in these vehicles, machines and appliances after 1st April 2022.
You must either flush out the tank to remove all traces of rebated fuel when switching uses
or use fully duty-paid diesel/biofuels for everything. This approach is required to ensure
compliance and avoid the misuse of rebated fuel.
Contingency back-up electricity generation and critical safety or environmental protection
equipment
Rebated fuel can be used only for power generation in premises being used for noncommercial
purposes. However, you can use up your stock of rebated fuel after the rules
change, providing you obtained and stored it before 10th June 2021 (when the Finance Act
2021 introducing the legislative changes received Royal Assent) for the following:
- contingency back-up electricity generation in premises used for commercial purposes
- critical safety and environmental protection appliances or machines in premises used for
commercial purposes.
If you have stocks of rebated fuel held for use as contingency back-up but which were
obtained after 10th June 2021, or you need to continue to use rebated fuel for technical or
safety reasons, you may be granted a licence by HMRC to continue using rebated fuel.
You would need to apply to HMRC and if they approve the use pay the duty difference
between that for rebated and non-rebated fuels on the fuel you expect to use. If you are
concerned that you will not be able to use or dispose of fuel obtained after 10th June 2021
by 1st April 2022, you should contact oils.policymail@hmrc.gov.uk, ideally by 30th
November 2021.
You will not be expected to flush out all traces of rebated fuel from the fuel tanks of back-up
generators or critical safety and environmental appliances, or from storage tanks used to
supply them.
Contingency back-up electricity generation means:
- using contingency back-up generators when necessary to ensure continuity of power. This
does not include generators used as the main source of everyday electricity
- commercial electricity generators such as those activated to manage pressures to the
national grid, and
- where a volume of back-up fuel is required to be held in reserve for security and regulatory
purposes to maintain essential electricity supply.
The term critical safety and environmental appliances includes fire protection systems,
medical and life support equipment, and auxiliary boilers which are designed to provide
safety and environmental protection.
HMRC’s Approach to Compliance
For those vehicles, machines and appliances allowed to use rebated fuel up to 1st April 2022
but not after, there will likely be a period between the rules changing and the rebated fuel
in the internal tank or engine of the machine being used up. How long this will take will
depend on the type of vehicle/machine, the size of its fuel tank and the rate of fuel
consumption. HMRC acknowledges that due to the requirement to maintain minimum fuel
stock levels for safety reasons and operational requirements, fully duty-paid fuel may be put
into and mixed with existing stocks of rebated diesel in the tank. As such, there may be a red
indicator in the tank beyond 1st April 2022.
HMRC may carry out checks on storage tanks, and on vehicles, machines and appliances
using diesel to confirm the correct fuel is being used. If, after 1st April 2022, HMRC find
traces of fuel markers in the fuel supply of a vehicle or machine that is not allowed to use it,
you may be asked to provide evidence to demonstrate that any rebated fuel was put in
before the rules changed and is still being used up.
You should be able to demonstrate that you have been refilling with the correct fuel since the
rules changed by retaining invoices or receipts showing purchase of fully duty-paid
diesel/biofuels.
If you use a vehicle or machine for both allowed and non-allowed purposes after the rules
change, you must either flush out the tank to remove all traces of rebated fuel when
switching uses, or refill with fully duty-paid diesel or biofuels for all of your use. You should
retain the necessary evidence to demonstrate the steps undertaken. For example, if you
hire a vehicle or machine which will be allowed to use rebated fuel for specific purposes,
you will need to retain evidence to confirm the correct fuel has been put into the fuel tank.
HMRC will consider what purpose the vehicle or machine was being used for at the time of
inspection and whether this was an allowed purpose.
Vehicles, machines, or appliances found running on rebated fuel unlawfully are liable to
seizure. HMRC officers will have the discretion not to seize if the user can satisfy HMRC,
through invoices/receipts, that they did not put rebated fuel into the fuel tanks after the
rules changed.
HMRC officers will take a pragmatic approach to enforcement, considering the steps you
take to switch to using fully duty-paid diesel or biofuels. HMRC will target users who
deliberately or knowingly use rebated fuel illegally by scrutinising receipts and invoice
records. Therefore, if HMRC officers have evidence or reason to believe you have put
rebated fuel into your vehicle, machine or appliance intentionally or recklessly after the
rules changed, you may be subject to the civil or criminal sanctions set out in Section 6 of
Excise Notice 75: Fuels for use in vehicles. Offences include, for example, the taking in or
misuse of rebated fuel in a vehicle, machine, or appliance for use as fuel when not allowed
to do so and misuse related to the supply of rebated fuel.
Refilling the tank of a vehicle, machine, or appliance with marked fuel outside the UK
In some jurisdictions or countries, such as the Channel Islands, Isle of Man or EU Member
States, use of marked fuel will still be legal in some of the vehicles, machines and appliances
that will no longer be allowed to use rebated fuel in the UK from 1st April 2022. If you refuel
your vehicle, machine or appliance in a jurisdiction or country where using marked fuel in
that vehicle, machine or appliance is allowed, you can use the fuel up in the UK. You will
need to retain receipts or other documents to satisfy HMRC that you have not refilled your
vehicle, machine, or appliance unlawfully in the UK. You will not be required to flush the
tank or your vehicle, machine, or appliance on your return to the UK.
When will the guidance be updated?
Excise Notice 75: Fuels for use in vehicles will be updated in advance of 1st April 2022. Other
guidance which refers to rebated fuel will also be updated to the same timetable to reflect
the new rules.