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Are You Clear About When You Can Use Red Diesel in Agriculture?

Date: 22/04/2022 | Environmental, Regulatory Law

Restrictions on the entitlement to use red diesel came into force 1st April 2022. Agriculture is exempt…but is it as straightforward as that?

What is red diesel?

Red diesel is diesel dyed red to show that it has attracted a significant tax rebate1.  The dye allows HMRC to check whether the diesel has been used legally. Red diesel is used across many sectors including agriculture, waste, recycling and construction.

What is changing and why?

From 1st April most sectors cannot use red diesel.  Exceptions exist for agriculture (including horticulture, forestry, and fish farming), rail and non-commercial heating.  The policy is intended to help meet UK climate change and air quality targets. The UK Government argues that removing most red diesel entitlements will ensure the tax system incentivises users of polluting fuels to improve vehicle and machinery energy efficiency, invest in cleaner alternatives, or simply use less fuel. While the policy intention is laudable several industry bodies2 have highlighted issues: alternatives to diesel power for most heavy machinery are not yet commercially viable and increased fuel costs reduce businesses’ ability to invest in less polluting machinery. See https://projectscot.com/2021/06/rethink-needed-on-red-diesel-policy/

But isn’t agriculture exempt?

HMRC guidance (‘the guidance’) is clear that red diesel can be used in vehicles and machinery used in Agriculture.  ‘This includes allowing vehicles used for agriculture to be used for cutting verges and hedges, snow clearance and gritting roads.’

https://www.gov.uk/government/publications/reform-of-red-diesel-entitlements/reform-of-red-diesel-and-other-rebated-fuels-entitlement

Agriculture, horticulture or forestry is defined as:

  • Agriculture - the science and art of cultivating the soil, growing, and gathering crops and rearing of livestock.
  • Horticulture - the science and art of cultivating or managing gardens, including the growing of flowers, fruits, and vegetables.
  • Forestry - the science and art of forming and cultivating forests and the management of growing timber. (Fuels for use in vehicles (Excise Notice 75)).

Where we refer to “Agriculture” in this article we include horticulture, forestry and fish farming.

Red diesel can only be used for purposes relating to Agriculture in agricultural vehicles, special vehicles, unlicenced vehicles, mowing machines and certain other machines and appliances.

The guidance aids interpretation of the phrase ‘purposes relating to agriculture’ highlighting that ‘agriculture is the growing and harvesting of crops, for food, beverages, fodder, fuel or industrial purposes; or the rearing of animals for the production of food, wool, leather, fur or other substances.  The keeping or breeding of animals for leisure (breeding of dogs, game birds or racehorses for example) is not agriculture.’

Vehicles used for purposes relating to agriculture on your private land.

If you use red diesel in agricultural vehicles, machines and appliances for purposes relating to Agriculture you will also be able to use them for any other purposes on private land where they are ordinarily kept.

But what if you need to travel between your fields?

The guidance is clear that you can use red diesel to travel to and from the place where the vehicle has an accepted use.  You cannot travel on public roads in an unlicenced vehicle.  Sometimes you will need to tow a vehicle which legally contains red diesel.  In that instance, the towing vehicle cannot use red diesel unless it qualifies in its own right.

What about transportation of your products generally?

Transportation of produce must be incidental to the Agricultural operation being performed.  It is for the person doing the transporting to prove this is the case.

If you were engaged in growing or harvesting crops, red diesel can be used to transport crops you have grown or harvested.  If your involvement is limited to transportation this constitutes haulage and white diesel would have to be used. 

The guidance gives examples where red diesel could be used:

  • Taking your produce and livestock to market for processing (including slaughter).
  • Transporting material to be used for maintaining or improving your farmland (including drainage pipes).
  • Transporting materials to repair and maintain your farm buildings (other than the farmhouse itself).

What if you are carrying out agricultural work on someone else’s farm?

Red diesel can be used in your tractor to drive to and from the farm where it will be used.  This includes carrying materials or equipment needed to do the work and removing produce or waste resulting from the work.  You can use red diesel to take waste resulting from the Agricultural activity to where it will be sold or otherwise disposed of.  You cannot use the red diesel if you are only transporting the waste but not engaged in the Agricultural activity which produced it.

So where is the line drawn?

The guidance highlights several activities that do not fall within the definition of Agriculture:

  • Dealing in Agricultural products.
  • Maintenance of recreational facilities including beaches.
  • Peat or loam extraction and flood protection.

The phrase used in the guidance ‘purposes relating to agriculture’ is likely to be interpreted strictly.  Given farmers often supplement incomes using machinery for construction work, the National Association of Agricultural Contractors (‘NAAC’) has warned farmers to take care not to fall foul of the law. https://www.fwi.co.uk/machinery/dont-get-caught-out-by-new-red-diesel-rules-naac-warns

For example, you cannot use red diesel for carrying out ground works, preparing foundations for wind turbines, taking away waste material from construction sites or maintaining recreational facilities.

What should be done to prepare?

With HMRC having the ability to seize vehicles mis-using red diesel and impose fines and sanctions on those who have intentionally or recklessly broken the law, it is important to prepare for the changes.  If HMRC believe that the exemption is being abused, they may target the Agricultural sector.  Accurate and up-to-date record keeping is essential.

Records should be kept showing that red diesel has been used for Agricultural purposes, especially where you are involved in operations requiring both red and white diesel.  

Those who use vehicles, machines or appliances for both accepted and non-accepted purposes are advised by HMRC to consider using some for accepted and others for non-accepted purposes.  If this is not practical, you must either use full duty fuel for all uses or drain and flush the tank of red diesel before the vehicle, machine or appliance is put to a non-accepted use.  Quite how practical this proves to be is an entirely different matter.   

At Davidson Chalmers Stewart we assist organisations in understanding what their responsibilities are, and will be, and help them plan for the changes needed to ensure business continuity.  If any of the issues above resonate with you or you would like to understand more about the potential impact on your business, please contact Chala McKenna or Henrietta MacPherson at Chala.McKenna@dcslegal.com or Henrietta.MacPherson@dcslegal.com


1 Tax on red diesel is approximately 11.14p/litre compared to approximately 57.95p/litre on regular diesel

2 e.g. Construction Plant Hire Association, National Federation of Demolition Contractors and RMAS

Disclaimer 
The matter in this publication is based on our current understanding of the law.  The information provides only an overview of the law in force at the date hereof and has been produced for general information purposes only. Professional advice should always be sought before taking any action in reliance of the information. Accordingly, Davidson Chalmers Stewart LLP does not take any responsibility for losses incurred by any person through acting or failing to act on the basis of anything contained in this publication.


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