Treasury written question – answered at on 21 February 2022.
To ask the Chancellor of the Exchequer, what estimate he has made of the amount of duty lost because of the fraudulent use of red diesel in (a) Wales and (b) the UK.
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.
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