Red diesel has long been a mainstay in the construction industry, offering a cost-effective fuel option for off-road vehicles and machinery. However, its use comes with rules and responsibilities that every construction business owner must understand. Recent regulatory changes in the UK have also tightened the rules, leaving some businesses uncertain about what they can and can’t do.
In this guide, we’ll explore the dos and don’ts of red diesel usage, helping you use it legally and efficiently within your operations while avoiding the pitfalls of tax noncompliance.
What Is Red Diesel? A Quick Overview
Red diesel is a type of gas oil that is taxed at a lower rate than standard diesel, making it a cheaper option for specific industries. To distinguish it from standard diesel, a red dye is added. While its use is restricted to specific purposes – such as equipment used in agriculture, forestry and construction – it cannot be used for road vehicles or activities outside these approved industries.
In April 2022, changes to UK Government regulations further restricted who could use red diesel. For the construction sector, the new rules meant that red diesel could only be used for certain types of machinery, such as excavators and generators, rather than for broader activities. These pieces of equipment must not carry any load when used on public roads.
The Dos of Red Diesel Usage
Do Follow Regulations Closely
The current regulations define specific equipment and uses that are approved for red diesel, and using it outside of these criteria could result in penalties or fines. For example, construction vehicles that travel on public roads are not permitted to run on red diesel.
The rules around red diesel use can be complex, and it’s worth seeking professional advice if there’s any uncertainty about what applies to your business. While HMRC guidance is a useful starting point, consulting a solicitor with expertise in fuel regulations can provide tailored advice to help you stay compliant. They can review your operations, clarify grey areas and ensure your business remains within the law when using red diesel as part of its operations. This approach reduces the risk of costly penalties and keeps your business running smoothly.
Do Keep Accurate Records
Keep clear records of how much red diesel you’ve purchased, how and where it’s stored and what equipment it has been used in. These records can protect your business in the event of an audit or inspection.
Invoices, fuel logs and maintenance records should all be organised and up to date. If you’re unsure about what details should be recorded, or if you’d like a legal review of your record-keeping processes, speaking to a solicitor could be helpful. They can advise on best practices and highlight any areas that might need improvement. Beyond legal compliance, keeping detailed records also provides you with better oversight of your operational costs, allowing you to identify where savings might be made.
Do Maintain Your Equipment
Using well-maintained machinery is an effective way to reduce unnecessary fuel consumption. Engines that are poorly maintained can become inefficient, consuming more fuel than necessary and increasing your operating costs. Regular servicing, cleaning filters, and checking fuel injectors can go a long way in optimising performance.
Properly maintained equipment also minimises the risk of fuel leaks, which could lead to wasted fuel, environmental damage, or both. If you’re handling equipment in a way that might have regulatory implications – such as storing fuel for long periods or repairing machines that have been flagged for leaks – it is worth getting legal advice to confirm that your approach is appropriate.
Do Educate Your Staff
Anyone handling or using red diesel in your business should be trained on how to do so properly. This includes refuelling procedures, understanding which equipment is eligible, and recognising the risks of misuse. Mismanagement of red diesel could lead to financial and reputational damage for your company.
Workshops or regular training sessions can reinforce best practices, particularly as regulations evolve. This level of preparation not only keeps your business compliant but also gives you peace of mind knowing that your workforce understands its responsibilities.
The Don’ts of Red Diesel Usage
Don’t Use Red Diesel for Unapproved Purposes
One of the most common mistakes is using red diesel in vehicles or equipment that do not qualify under the current rules. For example, road-going vehicles are prohibited from running on red diesel, even if they are used within a construction business.
HMRC conducts random checks and takes violations seriously. Using red diesel for unapproved purposes could lead to fines or even the seizure of equipment.
Don’t Overlook Proper Storage
Storing red diesel correctly is just as important as using it responsibly. The fuel should be kept in secure, bunded tanks to prevent leaks or contamination. Poor storage practices can lead to environmental damage, which could land your business in legal trouble.
It’s also worth noting that red diesel has a limited shelf life and can degrade if not stored properly. Regularly check storage tanks for water contamination, corrosion or any signs of wear that could compromise the fuel’s quality.
Don’t Disregard Environmental Responsibilities
Spills, leaks and improper disposal of red diesel can harm the environment and damage your reputation. Beyond regulatory compliance, taking steps to reduce environmental impact demonstrates a commitment to responsible business practices.
For instance, install spill kits near storage areas and train staff on their proper use. If an accidental spill occurs, respond quickly to minimise damage and report it if required.
Don’t Mix Red Diesel with Standard Diesel
Mixing red diesel with standard diesel can lead to operational issues, including contamination of fuel systems. More importantly, this can raise suspicion of tax evasion if the mixture is detected during an inspection.
Always keep red diesel and standard diesel storage clearly separated and labelled to avoid accidental mixing.
Recent Changes to Red Diesel Regulations
Changes were made to regulations around red diesel usage in April 2022. The purpose of these changes was to encourage businesses to transition to cleaner fuel alternatives and reduce overall emissions.
For construction businesses, the changes mean that red diesel can only be used in specific types of machinery, such as excavators and other off-road vehicles, as well as fixed equipment like generators. Activities outside these defined parameters now require the use of standard diesel or other fuels.
This change has pushed many businesses to explore alternatives, such as hydrotreated vegetable oil, which offers cleaner combustion and reduced emissions. While these alternatives may come with higher upfront costs, they often provide longer-term savings and environmental benefits.
Red diesel remains a valuable resource for the construction industry, but its usage comes with responsibilities. By following the rules, keeping clear records and taking care of your equipment, you can make the most of this cost-effective fuel without risking penalties.
At the same time, it’s important to stay informed about changes to regulations and consider transitioning to greener alternatives where applicable. Taking a proactive approach to compliance and environmental stewardship can help your business avoid unnecessary costs and maintain its reputation.
If you have questions about red diesel usage in your business, or if you’re exploring alternative fuels, start a conversation with industry peers or seek expert guidance to stay on track.