Business Support

Seeing red? The end of red diesel use by the industry is in sight

Association Technical Officer, Owen Baker takes a closer look at the issue that’s on everyone’s mind – the proposed changes to rebated fuel in the landscaping industry and what this means.

During the 2020 Budget the Government announced it was considering removing the entitlement to use rebated fuel from most sectors - including landscape maintenance and mowing machines, from April 2022 onwards. The proposed removal was put in place to incentivise the development and adoption of greener alternatives, and a consultation was accordingly put in place from July 2020 to October 2020.

Under the proposed reforms to rebated fuel use, agriculture, horticulture, fish farming and forestry sectors would retain the entitlement to use red diesel postApril 2022. However, construction, landscape construction, and most maintenance activities associated with commercial landscaping were explicitly excluded from using rebated fuel under the proposal.

Informal discussions with stakeholders confirmed the proposal was universally unpopular; Association members were concerned by the lack of alternative ‘green’ equipment available on market, the cost of transitioning to white diesel, the increased risk of theft and, most importantly, the potential for a detrimental impact on the environment as contractors and/or clients sought to reduce fuel use to meet budgets.

The Association urged the government to reconsider their proposal and highlighted the potential financial impact this decision would have on the industry, whilst offering little benefit to the environment. Solutions suggested to HMRC included allowing a temporary stay of execution of five years, as well as including landscaping activities within the horticulture sector.

What do the changes mean for the industry?

HM Revenue and Customs chose to proceed with their initial proposal and, in March 2021, confirmed the entitlement to use red diesel will be removed from most landscaping activities and construction from 1 April 2022. The greatest loss is likely to be felt by industry members who currently use red diesel in mowing machines for commercial grounds maintenance, although contractors reliant on construction equipment will also suffer. Internal calculations by the Association suggest, collectively, members will spend an additional £6 million on fuel because of the rule changes. There are limited scenarios when rebated fuel may be used by Association members as part of their work beyond April 2022. One of these is when activities are performed within the HMRC definition of ‘horticulture’.

HMRC regard horticulture as the cultivation and management of gardens, including flowerbeds, trees, shrubberies [sic] and ornamental lawns in public parks. HMRC have confirmed this definition of garden extends to communal gardens in areas of social housing but is distinct from the maintenance of grassy recreational areas such as playing fields or grassed areas used for walking, picnics, and general recreation.

HMRC also allow rebated fuel to be used by agricultural vehicles for

specific tasks including cutting verges and hedges bordering a road, clearing snow, gritting, and assisting any clear-up following flooding. The HMRC definition of ‘agricultural vehicles’ includes tractors, but the tasks do not go beyond those outlined; for any other use the vehicle tank must be drained, and white diesel used instead. This limits the flexibility of equipment using red diesel.

In addition to landscape maintenance and landscape construction, Association members undertake tasks including winter maintenance, street cleansing, amenity tree works and fencing for a diverse range of clients. The reforms to rebated fuel use will also affect these activities; many will lose their entitlement to red diesel. The Association advises checking the HMRC or contacting us directly with enquiries relating to these uses.

Suggested action

The Association predicts most landscape contractors will be affected by the reforms and advises members to review the guidance issued by HMRC and watch on-demand our webinar.

From 1 April 2022 stakeholders must not put rebated fuel into the tank of a vehicle, vessel, machine, or appliance that is not permitted to use it. Stakeholders are however permitted to use rebated fuel in a vehicle or machine after 1 April 2022, if the fuel was legally put into the vehicle or machine before 1 April 2022.

If, after 1 April 2022, HMRC find traces of fuel markers in the fuel supply of a vehicle or machine which is not allowed to use it, stakeholders may be asked to provide evidence to show that any rebated fuel was put in before the rules changed and is still being used up.

Stakeholders should be able to show they have been refilling with the correct fuel since the rules changed by keeping invoices or receipts showing they have purchased diesel or biofuels which have had full duty paid.

Stakeholders who use a vehicle or machine for both allowed and nonallowed purposes after the rules change must keep records which demonstrate they have flushed the tank, or the fuel being used has had full duty paid.

Members who cannot use red diesel from 1 April 2022 should also plan to use stocks of fuel held in storage tanks by April. If supplies of red diesel are required between now and April 2022, HMRC advise stakeholders use the amount expected to be used by the deadline. Stakeholders are not expected to flush out rebated fuel from storage tanks. Find out more and watch the webinar online at bali.org.uk

Owen Baker - Technical Officer (Policy & Research)