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Red Diesel a Fair or Flawed System?

For years, red diesel has been used by farmers and constructions workers to power heavy duty machinery used for off-road purposes. At around half the wholesale price of conventional “white” diesel used by motorists, off-road use is not subject to the taxes and duties applicable to road users.

In theory this is a fair policy as non-road users should not have to pay duties to cover wear and tear to the highway system. However, recent reports in the media have questioned the policy’s robustness and some clarification might be needed to restore confidence in the diesel price system. At present, the difference in the wholesale price of white and red diesel is 111-112 pence per liter and 65-66 p.p.l. (both excluding VAT) respectively. At almost half the price of white diesel, farmers are able to minimize fuel costs and avoid paying duty for road investment they are not liable for.

Her Majesty’s Revenue and Customs (HMRC) currently makes a huge effort to detect and prevent the illegal use of red diesel on the highway with regular and unplanned road side checks for diesel vehicles. Red dye used in red diesel can be detected to just a few parts per billion, so even if a diesel vehicle has run red diesel in the past but is currently using white, the red can still be detected.

However, there are inevitably red diesel users who are required to take their off road vehicles on to the highway, for example when moving farm or construction machinery from site to site. HMRC has subsequently made the process of policing fuel use easier by charging farmers and construction companies full duty on a certain, predetermined percentage of the total red diesel used, which makes it a lot easier for both parties to manage:

“Farmers do also suffer from the higher duty for road fuel; both on their haulage costs as they are located remotely, and due to the price of road fuel tending to be higher for rural locations,” said the National Farmers’ Union (NFU).

However, HMRC has been told to clarify its policy on the industrial use of red diesel recently after losing a court battle. Last year, a tractor driver in Cumbria was stopped by HMRC when he transported land drainage pipes from a builder’s merchant back to his farm. Officials advised the driver that he was not allowed to operate an agricultural tractor on red diesel on the public highway for this purpose and duly fined him £250.

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