Red diesel rules

NAAC experts explain the rule changes regarding using red diesel

On 1 April this year the entitlement to use rebated (red) diesel changed. While the new rules still allow its use in farming and some other industries, others such as construction and waste management, as well as leisure, must now use only white, fully taxed fuel.

For farmers and, particularly, contractors this will create great difficulties because their operations may involve their vehicles working across different sectors – some for which red diesel is permitted and in others where it is not.

What is allowed use?

Agriculture, horticulture, fish farming and forestry retain the use of rebated fuel.

It is therefore important to be clear that any work you do is specifically for an agricultural purpose. This is not necessarily the same as just doing work on agricultural land. The operation you are doing must be of benefit to the land/livestock.

HMRC defines ‘agriculture’ as ‘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.’

You can also use rebated fuel in agricultural vehicles when:

• Cutting verges and hedges that border a road

• Clearing snow

• Gritting

• Assisting any clear-up following flooding.

Questions and answers

Earlier this year the NAAC held a virtual meeting with HMRC in which it endeavoured to nail down what exactly is permitted use and what is not. Here the association’s experts outline some of the main changes and provide answers to some of the most common questions.

Q What defines ‘agricultural and horticultural use’?

A In simple terms agricultural use is doing work for agricultural benefit. The specific definitions can be found in section 12 of the Excise Notice 75.

An agricultural operation will require specialist skills, knowledge or technology relating to the industry and must be for the benefit of the land/livestock. Red diesel can be used in an agricultural vehicle for any purpose on land where it is ordinarily kept and used primarily for purposes relating to agriculture, horticulture, forestry etc.

A farmer can also use red diesel in machines or appliances (other than vehicles) for any operation on their premises, provided the machine is ordinarily kept on that land and is otherwise used for purposes relating to agriculture, horticulture, forestry etc.

Q Can an agricultural contractor use rebated fuel?

A Provided a contractor is using an allowed vehicle or machine for an allowed purpose, they can continue to use red diesel when driving to and from the farm, carrying materials or equipment needed for the job and removing waste resulting from it.

Q Can a self-employed contractor with their own tractor and trailer use red diesel if employed by another contractor as part of the harvesting team?

A Yes, provided the contractor is part of the harvest team, taking the produce off the field. This is an off-road operation integral to the agricultural operation that could not be done by an HGV.

If farmers and contractors help each other with work, then it is important that both parties are part of the team and working for agricultural benefit as part of the operation. For example not doing a job that involves only transporting the produce — which is haulage.

Allowed vehicles or excepted machine?

Once a legitimate use (as shown in Excise Notice 75) can be established it is then important to confirm that the vehicle you are intending to use is allowed to use red diesel. ‘Excepted machines’ that are allowed to use red include agricultural vehicles, special vehicles, unlicensed vehicles and certain machines and appliances. They must, however, only be doing an approved operation not just working off-road (as was currently allowed).

Further details

For full details use an internet search for: ‘Excise Notice 75, Memorandum of Agreement (MoA)’. This provides a link to HMRC guidance on using rebated fuels in vehicles and machines, which is a valuable reference point for whether an operation has an ‘agricultural purpose’.

Q How can I operate when my vehicles (tractors, diggers) may regularly switch between agricultural and nonagricultural jobs?

A HMRC suggests the ideal scenario would be to have designated vehicles for allowed/non-allowed purposes. However, for many contractors this simply isn’t possible — not to mention the increasing cost of machinery.

If you are switching to a non-allowed white diesel operation, the tank needs to be thoroughly drained and then flushed out with white diesel.

Contractors should record this and retain all documentation to show:

• When a vehicle or machine was filled up with red diesel.

• When it was flushed out.

• When it was refilled with full duty-paid fuel.

• The vehicle or machine has previously been used for allowed purposes — as proved, for example, by the job invoice.

There is no guarantee, however, that any of the above paperwork will be sufficient to avoid seizure of the vehicle if officers detect vehicles or machines with traces of red in a tank of white diesel on a non-agricultural job. However, the NAAC expects HMRC to be focused on enforcement of criminal evasion and be looking for the use of red in non-allowed operations.

If a vehicle is taxed as an agricultural vehicle, however, it must be used solely for agricultural use and therefore switching to a non-agricultural use may put you on the wrong side of vehicle taxation law. If the job is for hire and reward (haulage) you may also need to consider additional haulage requirements, such as the driver’s hours.

Q Can I use red all the time and just pay back the tax if I then do any non-agricultural work?

A No, HMRC is clear that it is illegal to use rebated fuel for a non-allowed purpose and if caught doing so you will be liable to prosecution and having your vehicle or machine seized.

Q Can dual tanks be used?

A No, this continues to be illegal.

Q I use my vehicles on construction work. Do I need to run my non-agricultural vehicles on white diesel?

A Yes, and it will be important to ensure customers that have previously had access to red use off-road are aware of the changes. In quoting for new jobs, you should include the price of using white diesel and ensure customers are aware that the use of red (even off-road) is illegal on construction sites.

Q Can I use red diesel in my unlicensed equipment (e.g. drainage trencher/digger) when engaged in agricultural land drainage contracting?

A Yes. These are all allowed special vehicles and can use red if carrying out agricultural drainage. This means the work done to create drainage for agricultural land must be done for the benefit of the agricultural land to be accepted as an agricultural activity.

Where drainage or utilities such as telephone or electricity cables cut across agricultural land, work involved in laying them or maintaining them is not an agricultural activity.

The NAAC’s informative brochure ‘Red Diesel — your questions answered’ is free to download from its website: www.naac.co.uk

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