Question to the HM Treasury:

To ask Her Majesty's Government what is their latest estimate of (1) the amount of red diesel used in the UK, and (2) the duty derived from red diesel.

As set out in the Hydrocarbon Oils Bulletin published by HMRC, the taxation of 4,710 million litres of gas oil (i.e. red diesel) raised £522 million in 2020-21, and the taxation of 5,065 million litres of red diesel raised £559 million in 2019-20.

The Measuring Tax Gaps 2021 report published by HMRC sets out that the oils tax gap, which includes Great Britain and Northern Ireland diesel, is estimated at 1% (£190 million) in 2019-20, of which £150 million was in duty and a further £40 million in VAT. As set out in the annex of this report, the tax gap is driven by the misuse of rebated fuel, which is subject to a lower duty rate.

The Chancellor confirmed at Spring Budget 2021 that the Government will remove the entitlement to use red diesel from most sectors from April 2022. This will help to ensure fairness between the different users of diesel fuels and that the tax system incentivises the development and adoption of greener alternative technologies.

The reduction in legitimate red diesel usage following these reforms coming into effect is expected to reduce the level of illegitimate use overall, as it will be harder to obtain red diesel for deliberate misuse in road vehicles due to there being less red diesel in circulation.