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Food delivery exemption sought as diesel tax break due to end in 2022

15 September 2020

Food industry representatives have urged the Treasury to delay its proposed ban on the use of red diesel by food delivery vehicles until 2025.

In its March 2020 Budget, Government announced that from April 2022 it will remove the entitlement to use red diesel.

Red diesel is the same as road diesel but has a red dye added. At the moment it is tax exempt, unlike road diesel, so is around 47p cheaper per litre. 

It is limited for use in certain industrial applications, such as the refrigeration units of lorries, forklifts, tractors, bulldozers, cranes, combine harvesters, and back-up power generators.

Collectively food manufacturers, hauliers, wholesalers, and retailers are making the case to exempt food deliveries from the removal of the tax break for a further three years.

They operate more than 40,000 temperature-controlled vehicles transporting chilled and frozen food across the UK. These vehicles are crucial to a safe and resilient food supply chain, and to tackling climate change by minimising food waste.

The proposed change would impose at least £100 million of unavoidable costs on to the bottom-line of logistics, retail, and food manufacturing businesses.

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The Cold Chain Federation, British Frozen Food Federation, and Federation of Wholesale Distributors have written to the Chancellor urging him to reconsider a tax hike that will cause further economic distress to a Covid weakened supply chain.

They also argue that, while progress is being made in rolling out alternative technologies, there is still not a viable alternative to diesel-powered refrigeration for a large proportion of the food transportation relied on to supply manufacturers, retailers and restaurants across the UK.

They argue that a later implementation date, coupled with a roadmap that directs funding available for green innovations into supporting businesses to fast track the testing and adoption of new technologies would achieve the environmental objectives and support industry at a critical time.

Cold Chain Federation chief executive Shane Brennan said: “We support the ambition for a diesel-free future for all road transportation, and cold chain hauliers have shown their willingness to move away from diesel especially in smaller vehicle categories. However, there are not yet robust alternatives to diesel power for all types of food transport, and so imposing this tax change too early will have a punitive economic impact on low margin businesses that are reeling from the effects of Covid 19.”

Representatives of the food industry met with HM Treasury to discuss its members’ concerns in early September 2020. The Federations continue to work with government on developing a comprehensive joint-plan for reducing harmful emissions from refrigerated vehicles, all of which was cast into major doubt by the Budget announcement in March.

For more information, visit www.coldchainfederation.org.uk