Consultation to remove red diesel entitlement announced

Chancellor Rishi Sunak has shared plans to review the current use of red diesel.

The government is set to consult with red diesel users to determine whether continued access to the fuel is justifiable. The consultation will be conducted with a view to remove the entitlement to red diesel use, except for agricultural, rail and non-commercial heating purposes, by April 2022.

Commercial boats on open waters, including ferries and fishing boats, will remain entitled to the Marine Voyages Relief so will not face a charge increase if the entitlement to use red diesel is revoked.

This decision has been taken by the Chancellor with the intention to incentivise businesses to improve energy efficiency and to investigate greener alternatives where possible.

According to the impact summaries published by the government:

“This measure, if introduced, is expected to impact users of private pleasure craft who currently use red diesel. It would prohibit the use of red diesel unless a separate tank was used for supplying fuel for domestic use on board. Costs on crafts for installing a separate tank are estimated by their representative bodies at around £500. However, many craft do not have the space for a separate tank and associated other equipment. These craft users would have to use fuel that has had duty paid at 57.95p per litre for domestic use instead of the rebated fuel duty rate of 11.14p per litre they currently use, and VAT at 20%. Customer experience could therefore be negatively impacted given these increased costs. Where craft have one tank for propulsion and heating, the government will explore options that prevent individuals from having to pay a higher rate of duty on their heating use than they would otherwise have to pay. This measure could have an impact on the disposable income available to individuals and their families. However, this would depend entirely on their amount of fuel usage.”

In a statement, the RYA says that “while red diesel remains the primary and often only fuel available at the waterside, it should continue to be available to recreational boaters in the UK for the purpose of propelling a private recreational vessel”.

HMRC has confirmed there will be a consultation in the spring. The RYA says it will be working with other significant stakeholders to make a strong representation on behalf of recreational boaters. Although details of the consultation have yet to be set out, the RYA says it intends to remain fully engaged with the debate surrounding the continued availability of diesel for private recreational craft at the waterside.