Red, white and grey

28 March 2022

As previously reported, the transition to using white diesel after the imminent removal of the red diesel rebate for construction applications from 1 April is posing challenges, questions and some confusion. 

For example, a hirer contacted me with the following query:

“There seems to be a lot of confusion in the industry with regard to the charging of VAT on white diesel quantities below 2300 litres. 

“We have been buying white diesel for our hire business for some time now and are currently being charged 20% VAT for all our purchases, because this is what the fuel companies believe is right, for any quantity of white diesel. 

“However, having spoken to one or two of the fuel company representatives they do seem unsure on what is right and what is wrong.” 

I spoke to some industry experts and the answer is that the hirer and his fuel supplier are correct: VAT on the purchase of any quantity of white diesel is charged at 20%. 

The confusion seems to be arising over the fact that red diesel is subject to a reduced 5% rate of VAT for supplies of up to 2300 litres. But this does not apply to white diesel. 

And of course, red diesel can only be used for an approved purpose, such as for vehicles and machinery used in agriculture, horticulture, fish farming and forestry; for heating and electricity generation in non-commercial premises; for maintaining community amateur sports clubs as well as golf courses; as fuel for all marine craft refuelling and operating in the UK; and for powering the machinery of travelling fairs and circuses. But not construction.

So to recap: from 1 April, construction is no longer an approved purpose for using red diesel, and white diesel supplies of any quantity are charged at a rate of 20%. 

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