Despite construction professionals' efforts to delay this, businesses in the industry will no longer be able to use red diesel starting today.
The Government announced in 2020 that it would remove the ability to use red diesel and rebated biodiesel from most sectors from April 2022 in a bid to meet its climate change and air quality targets.
Red diesel is a cheaper alternative for most construction companies. It attracts significantly less fuel duty than white diesel with duty of 46.81 pence per litre less for red diesel than white diesel. Red diesel is also subject to a reduced 5% rate of VAT for supplies up to 2,300 litres.
Why has the law changed?
Red diesel accounts for the production of almost 14m tonnes of carbon dioxide a year while its use in construction alone caused 7 per cent of nitrogen oxide emissions in London in 2018.
HM Revenue and Customs (HMRC) has said the new restrictions are designed to help meet "climate change and air quality targets" and "more fairly reflects the harmful impact of the emissions" red diesel produces.
The government target is for the UK to be carbon neutral by 2050.
The construction industry
UK construction has seen five climate-related regulatory changes in the last twelve months, all coming with specific tax increases, as well as suffering from the effects of Covid-19 and the war in Ukraine.
Much of the construction industry has called for the Government to invoke its power to defer the red diesel ban, with some urging for them to consider a more gradual process to allow for companies to adjust, plan and adapt over the medium term to avoid triggering a wave of company collapses and putting associated businesses in jeopardy.
Even though a petition that stated how a postponement would give the construction industry time to bounce back after the pandemic was created and gained momentum, no changes were made to the date of the ban's enforcement.
Although there are some exceptions to the ban, it all comes back to which sector you are working in, and construction, unfortunately, falls outside that category.
This has caused widespread unease across the industry, with some companies worried for the future of their business stating 'they may not actually be there in a few months because of these excessively increased costs'.
What is the punishment for the illegal use of red diesel?
Although it has promised a pragmatic enforcement approach, HMRC is clearly motivated to crack down on unjustified use of rebated fuel. It has the powers to levy a penalty equal to the duty avoided, issue fines of up to £250 and ultimately seize the offending piece of machinery, which could be by far the biggest hit for contractors.