CLA Midlands Blog: Red diesel exemptions and the effect on non-agricutural operations.

CLA Midlands Rurak Surveyor John Greenshields
CLA Midlands Surveyor John Greenshields

Updated: 15 March

CLA Midlands Surveyor John Greenshields reminds members of some potentially costly changes ahead.

We are now less than a month away from the amendments to the rebate red diesel allowable uses. We strongly advise members to be aware as they are changes that could impact many, especially those who diversify away from a purely agricultural business.

The changes to the red diesel rebate come into force on 1st April 2022. Unfortunately, it will not be an April fool’s prank if an HMRC inspector takes a fuel sample from any vehicle that may not be undertaking agricultural operations at that very moment. The changes impact all non-agricultural uses, but HMRC has not been forthcoming in supplying the industry with detail. The only permitted use of red diesel is within the agriculture, horticulture, fish farming and forestry sectors who will retain the use of rebated fuel.

That being said, taking into account the general direction of travel I recommend that the sector begins to consider what the costs would be for the potential long term loss of red diesel.

What is probably more pressing, following the sharp price jump following the recent Russian invasion of the Ukraine is the impact on input prices, especially fuel and fertiliser (at the time of writing the price of red diesel is in the region of £1.15pl). We don’t want to ever be caught cold like areas of the construction sector have been. There is no indication as to the duration or the possible escalation of the conflict, so British farmers should adopt a significant degree of contingency, particularly as we continue to enter into trade agreements with nations following Brexit.

With this in mind, it is worth taking steps to make your business more resilient to external shocks. Therefore consideration may be given today to compensate for inflating inputs. This can be done by reviewing your farming operations and adopting precision farming equipment which encourages increased efficiency. Such as planning jobs in such a way that you can kill two birds with one stone and reduce fuel use. Members should be advised that grants may become available for such equipment and should keep an eye out on the CLA website for more information. Furthermore members should continue to explore options to gradually reduce their reliance on fertilizer which continues to inflate in price and will probably come under increasing pressure due to the emissions involved in production. This can be done by looking at cover crop options, changing the sward or reevaluating the use of livestock in the system.

If fuel costs multiply overnight, this could lead to some businesses considering their future in the sector

CLA Midlands Rural Surveyor John Greenshields

Returning to the matter in hand, some of the main points of interest:

  • Ploughing matches can continue to use red diesel.
  • You can use rebated fuel in agricultural vehicles when performing duties such as snow clearing, cutting road hedges, gritting and clearing up after a flood.
  • If vehicles are being used for both agricultural and non-agricultural it is essential that you keep records of both red and white diesel purchases, and relate them to your work. It remains to be seen as to how pragmatic a view HMRC will take on the matter of draining and flushing out tanks between agricultural and non-agricultural work. We recommend that members have a strong paper trail and put themselves in the shoes of HMRC. Noting that HMRC have a job to do and have wide ranging powers, including vehicle seizure.
  • For any new work ensure that you quote for the right fuel and if you need to clean the tank.
  • With the harvest of crops, particularly straw and maize, if you are only involved in hauling (and not involved in harvesting or baling) the crops then you will be required to use white diesel.
  • Construction work, even of farm buildings, must be done with white diesel.
  • If creation environmental spaces, such as set aside, for an agricultural purpose or scheme you can use red diesel. However if the set aside is purely for the benefit of a local shoot, then it is classified as recreation, and white diesel must be used.
  • Equestrian premises, that are purely serving a recreational purpose should be using white diesel.
  • Forestry work can use red diesel but work that isn’t classified as forestry includes work to .

For more information members can look at HMRC’s Excise Notice 75, this guidance can be found at https://www.gov.uk/guidance/fuels-for-use-in-vehicles-excise-notice-75ortant for multi-purpose vehicle and machine owners from 1 April 2022, to avoid risking being liable for prosecution as well as the seizure of their vehicles and machines.

CLA Members should contact their regional office for bespoke advice.

Key contact:

John Greenshields
John Greenshields Rural Surveyor