Grey areas with red diesel
4 May 2022
Following on from yesterday’s post outlining reactions to the removal of the red diesel rebate for construction users – which included the view that it was the biggest challenge that the hire industry has faced for years – some other hirers have given me their initial experiences one month on from the regulations’ introduction.
One is Tim Garland, managing director of Elvington Plant Hire near York. When he spoke to me before the regulations changed he was apprehensive, but actually the reaction from customers since 1 April has so far not been as vehement as he feared.
“No one has really kicked off about it. A lot of our customers were aware of the change and have just accepted it. And if they don’t like what we charge them for white diesel, we tell them they can go to a filling station and do it themselves if they want to.
“However, we did have a roller come back the other day with red diesel in it, from a farmer who was maintaining trackways – even though we have put stickers on our machines warning of decontamination charges. We were unsure what to do: it’s a grey area whether it’s a construction task or not. And do we really want to get into a scrap about a charge of £300 to drain and refill the tank?”
Tim says that Elvington has a diverse client base and that a fair proportion of hires are for one or two days only. This reduces the likelihood that the customer will need to refill a machine within that period. The fuel bills won’t be so eye-watering and so small contractors or one-man band operators are likely to be more able to pass that cost on to customers.
But for big hire companies serving large contractors with a lot of heavy plant, the fuel price impact will be considerable.
“In fact, we did have one customer working on a farm and doing a construction task who said that he’d seen our sticker on the machine about the £300 cleaning charge, but he said it would be cheaper for him to take the hit and fill the tank with red because of the quantity of fuel he would be using," says Tim. "That’s likely true: but we told him it would be illegal."
Thomas Smith, joint managing director of Smiths Equipment Hire, says that the presence of white diesel instead of red on a site or at a depot now represents a considerable theft risk as the fuel is untraceable.
“It’s been quite common for some sites to protect red diesel fuel storage tank caps with a simple hasp and lock, which would take a couple of seconds to remove with a cordless angle grinder.
“If the average man in the street is paying £1.80 a litre at a forecourt and someone offers him 50 litres at, say, £1 each, he’ll bite his hand off. Theft is going to go through the roof.”
Many hirers believe that HMRC should have kept the red dye in the diesel, making it traceable, but removed the rebate.
“We haven’t had many complaints from customers about the switch from red to white, but there has been a lot of naivety. Some people asked us to swap machines because they have had red diesel in them, and we told them that they just have to fill the tank with white from now on,” says Thomas.
“However, a few months from now it will be different. If we get machines back with red diesel in them, we will have to pay to dispose of it, drain the tanks and change the filters, and we have warned customers that there will be a charge for that.”
All this uncertainty and different attitudes amongst customers makes it important that hire companies keep accurate fuel records so that, if challenged, they could show what fuel they have supplied, to whom and when.
Back at Elvington Plant Hire, Tim Garland says that “any machine that comes back full now, we add a note to the hire contract on our Syrinx computer system, saying that the customer has filled the tank. This gives us an audit trail to show that we have not supplied any red diesel ourselves.”
Jim Longstaff, managing director of Clements Plant & Access Hire, says that “customers are just having to accept the situation. But I do think it’s the most obtuse, stupid decision that the Government has made. It’s purely a tax grab. What the Chancellor hasn’t taken into consideration is the impact that the higher fuel cost must have on prices in every walk of life.
“We’ve certainly had some customers who have had their eyes wide shut and hadn’t been aware of the new regulations. And I think some were hoping that the Chancellor would delay their implementation in his Spring Budget Statement because of the inflationary spiral we all face.
“It’s had an effect on turnover because we used to be able to sell red diesel to those customers who needed it, but now they can just go to the local filling station to get white.”
Jim also pointed out anomalies and shortages caused by the volatility of oil prices created by factors ranging from general inflation and energy price spikes, to the Ukraine war and Extinction Rebellion environmental activists disrupting tanker deliveries. At times, he says, the price per litre at fuel forecourts has been cheaper than bulk deliveries.
Indeed, there have been many posts on social media platforms showing tractors, excavators, dumpers and other large plant filling up at supermarkets. Could that be part of the reason for the fuel shortages that we hear of in some areas?
