Peatland ACTION – Position statement - Use of Red Diesel
Peatland ACTION – Position statement - Use of Red Diesel – 1 April 2023
In April 2022, HMRC introduced changes in the use of red diesel and rebated biofuels. The initial interpretation of the guidance concluded that peatland restoration project did not meet the criteria to use red diesel. Following this contractors delivering peatland restoration works switched to white diesel, with increased costs covered by grant awards.
Subsequently, discussions with HMRC sought to confirm whether peatland restoration may in fact fall within one of the qualifying purposes (exemptions), as with forestry and agriculture. These discussion have concluded a change is position is permissible and Peatland ACTION has now amended its position on the use of red diesel.
Current interpretation of the guidance
The HMRC Excise Note lists a number of activities not accepted as falling within the definition of agriculture, horticulture or forestry, which includes land holdings solely used for sporting activities. The current position is that Peatland restoration falls under the definition of ‘purposes relating to agriculture’ for which there is an exemption with regard to the use of red diesel.
The key details are:
- The HMRC’s Excise notice 75, section 12, states that red diesel can be used in agricultural and special vehicles and machines by a contractor or other person engaged to perform an agricultural, horticultural or forestry operation.
- Red diesel can also be used for purposes relating to agriculture and in regard to peatland restoration these activities are the renewal, restoration and maintenance of ecosystems and habitats impacted by agriculture, horticulture and forestry, and areas of agricultural land under environmental management schemes.
- The use of red diesel in vehicles supporting the delivery of peatland restoration (a habitat impacted by agriculture and forestry) is therefore accepted in that circumstance.
When a vehicle carrying out allowable red diesel work (e.g. agriculture) is then used for non-allowable work the fuel tank will need to be drained and cleaned out so no trace of red diesel remains in the tank. Contractors will need to be made be aware of this requirement.
Although Peatland ACTION funds the diesel costs for a project, it remains the grant recipient and contractors’ responsibility to ensure that they are always complying with HMRC guidance.