In the 2020 budget, the UK government announced that it was removing the entitlement to use rebated red diesel from most sectors from 1st April 2022. Not included are the agriculture, horticulture, forestry, fish farming, and rail sectors and its use for non-commercial heating.
This means that farmers, and contractors hired to perform an agricultural operation on the land, will continue to be able to use rebated fuel in agricultural vehicles and machines used for accepted purposes in the agriculture sector.
Accepted purposes in the agriculture sector include the breeding or rearing of any animal kept for the production of food, wool, skin or fur, growing or harvesting of crops, fodder as fuel, growing or harvesting of flowering or ornamental plants, growing or harvesting of timber or other forestry products and the upkeep of agricultural land under environmental management schemes.
If contractors are contracted to carry out agricultural work on a farm, such as silage making, slurry spreading or fertilising the land, they can use rebated diesel in the tractor, when driving to and from the farm, carrying and transporting the materials or equipment that is needed to do the work, and to remove any produce or waste.
The use of rebated fuel is permitted for transporting agricultural supplies; such as seed, fertiliser, fence posts, and so on, for use on the farm, and for transporting livestock between different areas of land occupied by the same farmer and for transporting livestock to a place where the animals will be sold or processed.
In addition, farmers may use rebated fuel in agricultural vehicles to cut grass banks, hedges and trees alongside roads, clear snow and apply grit, and assist in any clear-up work following flooding.
Some activities are not accepted as falling within the definition of agriculture, horticulture, or forestry. For example, these include breeding, rearing any animal for sport or recreation, landscaping and flood protection.
Farmers who run a parallel business from the same premises which carries out activities that may not be classified as agricultural should seek guidance if they are unsure whether they can legally use red diesel for such purposes.
Furthermore, following pressure from the farming industry, HMRC has confirmed that the legislation will now be amended to allow red diesel to continue to be used for ploughing matches and charity tractor runs.
Please note that the UK Government guidance is used to support the interpretation of primary and secondary legislation relating to fuel duty, and as such is not definitive.