Red and white- tax changes on fossil fuel - Agriculture, road and rail

[whole diary]

[grahame]

From Farming Life

Red diesel will not be permitted for tractor runs or ploughing matches from 1 April

From 1 April, anyone taking part in a charity tractor run or ploughing match will be required to run their machine on white diesel, it has been confirmed.

From Pincent Mason

Businesses in the construction industry will no longer be able to use ‘red’ diesel from 1 April 2022 for most purposes.

From this date, it will no longer be legal to use red diesel for non-road mobile machinery such as bulldozers and cranes or to power mobile generators on construction sites. Businesses should prepare for the change by running down stocks of red diesel in storage tanks and considering the cost implications of a move to ‘white’ diesel, and whether these costs can be passed to customers or contractors.

Red diesel is diesel which contains red dye and other chemical markers to indicate that it is rebated diesel and has therefore been subject to less fuel duty than normal (white) road fuel diesel. The red marker allows HM Revenue and Customs (HMRC) to check whether red diesel is being used illegally.

Red diesel 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^▸ (Value Added Tax) for supplies up to 2,300 litres.

Now this has set me thinking ...  As I understand it,

* White diesel fuel for road vehicles attracts a tax of 57.95 pence per litre, plus VAT at 20%.
* Red diesel tax at 11.14 pence (calculated) plus VAT at 5%

So where does rail come in? 

From 1 April 2022 red diesel can only be used for 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;
* as fuel for all marine craft refuelling and operating in the UK^▸ (United Kingdom), except for propelling private pleasure craft in Northern Ireland; or
* for powering the machinery of travelling fairs and circuses.

It is explained ...

The change is being made to help meet the government’s climate change and air quality targets.

but I do wonder if it conveniently also raises an extra tax

On rail use, the government clarifies the new rules: ((here))

Vehicles used on railways

You can use rebated fuel to propel and stop a vehicle 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, unless they are also powered by the engine that propels the vehicle.

Now - here comes an extra question set in Devil's Advocate mode.

* In order to encourage a move away from diesel and other fossil fuel use right across the board, why continue to differentiate?

* Would not a move to a unified "white" taxation not encourage swifter electrification and more efficient systems where diesel cannot be easily or takes longer to move away from? 

* How much (diesel) fuel is used for the average passenger mile on a train, a bus and in a private car?

* Are red / white and other regime changes helpful in reducing food-miles and indeed other-goods-miles? In moving to local deliveries by electic cargo cycles rather than in white vans?

While I am in Devil's advocate mode ...

* With my home fuel bills soaring, where is all the extra money I'm paying actually going?

[ChrisB]

Obvious answer to your first question is thst they don’t want the Treasury to have to subsidise rail more than currently!

And your last question - you are being subsidised by your supplier who is paying more for your energy than you are paying them currently! Come April, with the new higher cap to be abnnounced, you arevlikely to catch up somewhat. But you aren’t likely to be contributing to your suppliers profits until the cap is sgain revised upward in October

[grahame]

And your last question - you are being subsidised by your supplier who is paying more for your energy than you are paying them currently! ...

Thank you, but that answers a question that's not the one I asked.   I asked about the end recipient of the extra money, not about the various middle men. So - who is my supplier paying, and what do THEY do with all the extra money, then?   If they are also a middle person and pay someone else ... who they ... ?

[broadgage]

As regards home energy bills, a fair bit of the extra money is ending up in Russia, via the greatly increased natural gas prices. The coming war in Ukraine will be expensive, and we will be paying for it.
Some will end up with other natural gas suppliers.

Returning to diesel fuel, I can not support requiring that railways use white diesel. It would lead to either service cuts, or higher fares or greater subsidy.

Neither do I support the exemption for travelling fairs and the like.

[Trowres]

Prescient of HMRC to start work in 2021 on demonstrating just how difficult interpreting rules can be and taking the heat out of the Partying at Work Regulations debate (or was it the Working at Parties Regs?). 

Let's go direct to the source: This one sort-of-explains the changes and lists both the old and new duty rates:
https://www.gov.uk/government/publications/reform-of-red-diesel-entitlements/reform-of-red-diesel-and-other-rebated-fuels-entitlement

This one tries to explain what can use rebated fuel and what can't:
https://www.gov.uk/guidance/fuel-used-in-private-pleasure-craft-and-for-private-pleasure-flying-excise-notice-554]https://www.gov.uk/government/publications/changes-to-rebated-fuels-entitlement-from-1-april-2022/check-when-rebated-fuel-can-be-used[/url

And the cracking one for boat owners:
[url]https://www.gov.uk/guidance/fuel-used-in-private-pleasure-craft-and-for-private-pleasure-flying-excise-notice-554

And if you wish to know what constitutes agriculture, forestry, etc see:
https://www.gov.uk/guidance/fuels-for-use-in-vehicles-excise-notice-75#memorandum-of-agreement

Now play spot the loophole or spot the grey area... 

[Trowres]

Here's my starter set:

You can use rebated fuel to propel and stop a vehicle designed to run on a railway, but not on a tramway.

1 The wording is ambiguous. Does it mean?:
a) You can use rebated fuel in a rail vehicle, provided it is designed to be incompatible with a tramway; or
b) You can use rebated fuel in a rail vehicle, as long as it's not running on a tramway at the time.

And secondly,
2. What is the legal definition of a tramway? The ORR^» (Office of Rail and Road formerly Office of Rail Regulation - about) has a definition, but that is explicitly only for the purposes of the document within which the definition appears.

Think of these in terms of:

• bi-mode tram-trains
• historically-identified tramways, such as the lost Weymouth Tramway and the mooted reincarnation of Glyn Valley Tramway
• Railways operating in "the public space" (not necessarily on highways) - see ORR

[Trowres]

And one with a heritage rail element:

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, unless they are also powered by the engine that propels the vehicle.

3. So while rebated fuel can be used to power the engines on a heritage DMU^▸ (Diesel Multiple Unit), the Smiths Heater (currently fed with diesel from the same tank as the engines) cannot use rebated fuel (unless for some reason the operation of the DMU counts as "non-commercial").

On the other hand, if you sell your DMU and buy a canal boat, you will find:
a) that you can use red diesel (unless you are in Northern Ireland)
b) that in spite of using red diesel, you are still liable to pay the full duty on fuel used for propulsion
c) You don't have to pay extra duty (i.e. you are getting the rebated rate) for fuel used for heating.

Do I have this right? - that the rail and boat situations are almost mirror-image? 

[Trowres]

My finale for tonight out of https://www.gov.uk/guidance/fuel-used-in-private-pleasure-craft-and-for-private-pleasure-flying-excise-notice-554#section5

Fuel purchased for private pleasure flying is subject to duty at the full rate.

Avtur, which is an unmarked type of kerosene, is fully rebated to a nil rate of duty. All avgas is subject to reduced duty rate whether it’s used for commercial or private pleasure use.

So private use fuel is full rated unless it's kerosine or petrol? 

[AMLAG]

- Red diesel will not be permitted for tractor runs or ploughing matches from 1 April

- From 1 April, anyone taking part in a charity tractor run or ploughing match will be required to run their machine on white diesel, it has been confirmed.

Thus presumably next will be that charity rail tours Diesel locos will have to use white diesel fuel (by fitting two seperate fuel tanks) and the same will apply to Diesel locos on tourist/fun lines when working passenger carrying trains !

[grahame]

- Red diesel will not be permitted for tractor runs or ploughing matches from 1 April

- From 1 April, anyone taking part in a charity tractor run or ploughing match will be required to run their machine on white diesel, it has been confirmed.

Thus presumably next will be that charity rail tours Diesel locos will have to use white diesel fuel (by fitting two seperate fuel tanks) and the same will apply to Diesel locos on tourist/fun lines when working passenger carrying trains !

No - if the diesel hauled power is on a railway, it can use red diesel, but if it's on a tramway it must use white.  At least the Weymouth Quay tramway has gone - it would have been very complicated to switch fuels behind the KFC.

[eightonedee]

* With my home fuel bills soaring, where is all the extra money I'm paying actually going?

Ultimately in the treasuries of oil producing states like Saudi Arabia and Russia (and from there no doubt into the hands of princes, oligarchs and arms manufacturers), but along the way we have to hope some stays in the coffers of international quoted oil companies so it ends up in taxes paid to more benign regimes and (most importantly) dividends paid to the world's pension funds and pensioners.

- From 1 April, anyone taking part in a charity tractor run or ploughing match will be required to run their machine on white diesel, it has been confirmed.

An early bid from HMRC for this year's meanest bureaucratic rule?

[broadgage]

It does seem a bit mean, but I doubt that it matters much in practice.
In the case of a ploughing match the ban on red diesel seems unenforceable anyway. Simply call it something else, "work experience day, on a working farm" should be fine on red.

And as for tractor runs, the requirement for white diesel may be p0litical, in France militant farmers fairly regularly blockade public places to protest/demand more money. This may be catching on over here.
Such protests could be discouraged by "dipping" the fuel tanks of vehicles in such protests and prosecuting those found with red fuel.

[Western Pathfinder]

Dipping of fuel tanks used to be common practice at agricultural fairs and shows,many times I've been asked by customs to see what the vehicle I was driving was running on.

[broadgage]

I suspect that the requirement for white diesel on tramways may be of very little real relevance.
Almost all UK^▸ (United Kingdom) tramways are electrically powered.
The odd diesel vehicle for repairs or maintenance if used on the road for other works should be on white diesel in any case.
In the relatively rare case of a diesel tramway only vehicle without road wheels, the extra cost of white diesel is very small if compared to other running costs. And if the operator decides to chance it and use red, the chances of getting caught are minimal.

As regards limited limited street running by a proper train as used to be done at Weymouth, simply re-brand it as a short bit of street running by a railway. The fact that the rolling stock used is clearly a train and not a tram will help.
No one is suggesting that trains must use white diesel across level crossings.