CPA Bulletin

22 CPA Bulletin > August 2021 www.cpa.uk.net Guidance for the industry By the time you read this, the government should have published its guidance for red diesel users affected by the removal of the rebate. This follows discussions with Her Majesty’s Revenue and Customs (HMRC) on what the guidance should outline and clarify for members. At the time of writing, we believe the guidance needs to: • be primarily written for the construction industry. The initial draft guidance we have seen is for all industries impacted, however, with construction the main sector affected, a version solely for construction must be produced. • be clear and consistent and simple to follow. Issues such as trace elements of red diesel in tanks, reduction in existing stocks and ordering new supplies ahead of the April deadline, the issue of mixed use of agriculture and construction machinery, all need to be addressed - with members clear on where they stand and what is expected of them come 1st April 2022. • acknowledge that machines will still contain elements of red diesel in the tanks post April - and recognise it will take time for these elements to be removed from fuel tanks if the machinery is not used on a consistent basis. Companies should not be penalised for not being able to hire out machinery - that is very much at the whim of the wider construction industry and the inherent economic demand which can be varied at the best of times. Provided companies can prove the red diesel was bought in the months prior to 1st April 2022 within reason, then it is not their fault if it is still there after a period post April. We want to see a consistent approach in how the new rules around red diesel in tanks is applied. We are concerned that, despite assurances fromHMRC that inspectors will take a pragmatic approach to inspecting fuel tanks and the levels of red diesel and the trace elements that will be there, there will be inconsistencies in how they approach this and what measures are taken against companies. There needs to be a set of national standards that inspectors and companies across all four nations in the UK can accept and be ready for when it comes to the ad hoc inspections that will inevitably take place. Any inconsistencies in how the rules are being applied will undermine confidence from the industry and could lead to an increase in fuel dumping by the less scrupulous elements of the sector who operate in the shadows of the vast majority of companies who demonstrate best practice and operate in line with existing legislation. The government’s justification for removing the rebate for construction, is its commitment to be the greenest government ever. With the move to phase out diesel and the rise in sales of electric powered cars, the direction of travel is clear. The construction industry is expected to follow suit, with the focus on reducing emissions, the move to net zero and the wider environmental impact of construction at the forefront of government thinking. This is something this year’s CPA Conference will look in more detail as we look at how the plant-hire sector can meet its obligations to net zero. The question centres on what viable alternative sources of fuel are likely to come onto the market? Presently it is a varied picture, with electric or hybrid electric powered machinery being developed and taken up by many companies, alongside HVO (Hydrogenated Vegetable Oil), biomethane and hydrogen all in development or being tested, albeit on a limited scale. The Department for Business has held several workshops since the turn of the year with the aim of looking to identify which fuels are viable, with a roadmap set out which identifies the challenges and drawbacks different fuels are likely to face, alongside the advantages and ability to reach critical mass. This work is very much in the development stage at present, with the results from these workshops yet to be released. Issues such as sustainability, the infrastructure needed and the support networks for each fuel will help identify which one is likely to ultimately be a viable alternative to diesel in the long run. What a potential roadmap looks like is unclear. Some fuels might only be used on a temporary basis, a gap between diesel and the final alternatives. Alternatively, we might be looking at a mixture of environmentally friendly fuels, whereby some types of machinery are run on one source, while others are powered very differently. Whatever the future looks like, the government must commit to working with the industry in charting the way forwards and being ready to support the development of new fuels that are cost-effective and work in the same way as diesel presently does. The government has taken away the rebate on red diesel for construction. It is now vital that as we move forwards, it works with us in both supporting the sector as it gradually makes the switch, while also maintaining competitiveness across the industry. This will be a long-term process - short term policy fixes and initiatives will not work. POLICY: 1 POLICY Removing the red diesel rebate - now what? In the last policy article for the CPA Bulletin, we outlined the Treasury’s confirmation that the red diesel rebate for construction would be removed on 1st April 2022. This is despite a concerted campaign across the construction sector, led by the CPA. The issues around the additional costs and impact on competitiveness - nonemore so than undermining the Government’s own ‘Build Back Better’ post pandemic recovery efforts, have been well documented, and ultimately dismissed by the Treasury. The question is - what next?