How changes to red diesel regulations are impacting farming 

Jul 9, 2022

With the war in Ukraine still raging, the price of farm inputs has been dominating the headlines for what seems like months.  

Among all this noise, it would be no surprise if you had missed another important announcement earlier this year about another volatile yet essential input – fuel.  

We are of course talking about government restrictions to the use of red diesel, otherwise known as rebated fuel.  

As we’re sure you’ll know, this fuel, which takes its name from a red dye used to differentiate it from higher rate white diesel, is intended for use in vehicles and machines that are not routinely used on the roads.  

Lower rate of tax 

Historically, rebated fuel has been taxed at a significantly lower level than white diesel, which is used to power road-going vehicles. In fact, there have been times when the level of rebate was 100 per cent although currently it sits at 20 per cent, providing significant relief for the agricultural industry, construction, and a range of other sectors too.  

But as of April 1st, this year, all that changed.  

Change in the law 

Sadly, this was no April Fool’s joke. The change in law placed significant restrictions on which vehicles could continue to use red diesel and which had to switch to its more expensive white counterpart.  

It has been brought in to help the government reach its climate change targets, in the belief that having to pay much higher prices for white diesel will convince those businesses with a heavy reliance on diesel to invest in more environmentally friendly solutions.  

The main change the new legislation has ushered in is replacing the on road/off road distinction with an ‘allowed use vs non-allowed use’ stipulation. Essentially, what this means is red diesel will still be able to be used for allowed activities, but not those classified as non-allowed.  

The construction industry, for example, has been particularly affected by the change as construction has been deemed a non-allowed use for rebated fuel. Whereas before April 1st, 2022, construction companies could use red diesel in bulldozers and other plant on a building site because it was classified as off road, as construction is now classified as non-allowed use, they can no longer do this. Instead, they are forced to use white diesel to power all their vehicles, plant and machinery, adding potentially tens or even hundreds of thousands of pounds to their annual fuel bill.  

Agricultural and allowed use 

As a sector, however, agriculture has got off relevantly lightly. Agriculture, horticulture, forestry, and fish farming are classified as allowed uses for red diesel under the new rules.  

This means red diesel can be used for growing and harvesting crops and rearing animals for the production of food, wool, leather, fur, or other substances.  

The rules state that rebated fuel can also be used in agriculture when cutting verges or hedges that border a road, clearing snow, gritting, and assisting in the clearing up of a flood.  

Conditions of red diesel use for farmers  

Unsurprisingly, there are some conditions on the continued use of red diesel, even for farmers. One of these is ensuring you’re using the right type of vehicle. According to HMRC, vehicles must be classified as agricultural vehicles to use it, and these fall into one of four types, including:  

  • A tractor. 
  • A single seat vehicle, weighing less than 1,000kg designed primarily for off-road use.  
  • A vehicle only used for agricultural, horticultural or forestry purposes, that is licensed to use public roads only when passing between two areas of land occupied by the same person, which are less than 1.5km apart by road. 
  • A vehicle with permanently attached or built-in machinery used for handling or processing agricultural materials, such as combined harvesters, crop sprayers, forage harvesters, pea viners, etc.  

Exempt activities 

Not all activities carried out on a farm are legitimate reasons to use red diesel. Those for which it cannot be used include:  

  • The breeding, rearing, or keeping of animals used in sport or recreation. 
  • Dealing in agricultural products.  
  • Flood protection.  
  • Peat or loam extraction.  
  • Exploitation of wild animal or fish stocks.  
  • Construction of buildings or other structures related to agriculture.  
  • The transportation of livestock, agricultural produce, implements, inputs or waste, other than where it is incidental to an agricultural operation being performed on the land.  

Under the new rules, agricultural contractors have the same rights as farmers to use red diesel.  

If you would like to discuss this, or any other form of diversification, get in touch on 01295 270200 or fill in the contact form here. 

Other Agricultural Spotlight Summer 2022 articles

Don’t let staycations become too taxing

Unpacking the facts about self-storage

The Spring Statement – A damp squib for the countryside?

Government announces plan to help farmers with rising input costs