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

CLA Midlands Rurak Surveyor John Greenshields
CLA Midlands Surveyor John Greenshields

CLA Midlands Surveyor John Greenshields alerts members to some potentially costly changes ahead.

As Climate discussions at COP26 draw to a conclusion there are many headlines that are all well and good. However, there is little detail about the practical implications and costs that may be imposed on individuals and business.

One example, which was announced by Westminster well before COP26, are the changes to red diesel exemptions.

Back in March 2020 the CLA defended agriculture's favourable position regarding the tax treatment of red diesel, along with wider agricultural capital tax reliefs. However, these red diesel reliefs will be lost from April 2022 for the construction sector.

This is a huge change which will impact a surprising number of members. The construction industry’s current red diesel tax rebate of 47p per litre will be lost as the sector will be moved onto ordinary white diesel. This will potentially have a significant impact on many individuals and businesses who undertake a combination of agricultural and non-agricultural work. A recent survey of Construction Index members demonstrates that there is a significant number of businesses who are simply not ready for this change, especially as we gradually move into a post Brexit/Covid world.

Therefore I would strongly suggest that members who operate in this area run their own business resilience check, a check that should incorporate inflation.

It isn’t just the cost impact on the business. If fuel costs multiply overnight, this could lead to some businesses considering their future in the sector.

It may require more significant capital costs, such as do you need to double up on machinery, with one fleet for agricultural work and another for non-agricultural work?

The CLA is pushing Government clarify the practical implications of this change on new kit or the use of the same kit between jobs, which will probably require changing of filters, tanks and the cleaning of fuel lines.

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

CLA Midlands Rural Surveyor John Greenshields

Therefore I would strongly suggest that members who operate in this area run their own business resilience check, a check that should incorporate inflation.

It isn’t just the cost impact on the business. If fuel costs multiply overnight, this could lead to some businesses considering their future in the sector.

It may require more significant capital costs, such as do you need to double up on machinery, with one fleet for agricultural work and another for non-agricultural work?

The CLA is pushing Government clarify the practical implications of this change on new kit or the use of the same kit between jobs, which will probably require changing of filters, tanks and the cleaning of fuel lines.

If officers detect vehicles or machines doing non-qualifying work running on red diesel after 1 April, those machines will be liable to be seized, but we understand that officers will consider mitigating factors in deciding on the appropriate action. As such, stringent record-keeping will be important 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