At Budget 2020, the Chancellor announced that he would remove the entitlement to use red diesel from most sectors from April 2022. These tax changes mean that most businesses in the UK which used red diesel prior to April 2022 no longer get a significant tax break compared with ordinary motorists; they instead now need to use diesel fuel taxed at the standard rate for diesel, which more fairly reflects the harmful impact of the emissions produced. These reforms are also designed to ensure that the tax system incentivises users of polluting fuels like diesel to improve the energy efficiency of their vehicles and machinery, invest in cleaner alternatives or use less fuel.<\/p>
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The Government recognised that this would be a significant change for some businesses and ran a consultation to gather information from affected users on the expected impact of these tax changes and make sure it had not overlooked any exceptional reasons why affected sectors should be allowed to continue to use red diesel beyond April 2022. During the consultation period, the Government engaged directly with a wide variety of organisations from all parts of the UK.<\/p>
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Following the consultation, the Chancellor announced at Spring Budget 2021 that the Government will grant further entitlements to use red diesel after April 2022 for a limited number of users. However, the Government did not believe that the case made by sectors that have not retained their red diesel entitlement outweighed the need to ensure fairness between the different users of diesel fuels and the Government\u2019s environmental objectives.<\/p>
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