Revenue & Customs Brief 02/08

Memorandum of Agreement on the use of agricultural vehicles on the road

A Memorandum of Agreement has been published on 10 January, clarifying what uses of agricultural vehicles on the public road qualify for entitlement to use red diesel and exemption from vehicle excise duty.

Tractors, agricultural engines, agricultural material handlers, light agricultural vehicles, and vehicles used between different parts of land, as defined in Schedule 1 of the Hydrocarbon Oil Duties Act 1979, are excluded from the definition of road vehicles, and are therefore permitted to use rebated gas oil, also known as ‘red diesel’. Red diesel has a duty rate of 9.69 pence per litre (ppl), compared with 50.35 ppl for road fuel. These vehicles are also exempt from vehicle excise duty, under Schedule 2 of the Vehicle Excise Registration Act, 1994.

The definitions of these vehicles contain restrictions on the purposes to which they can be put. Further clarification has been requested as to what constitutes acceptable use that qualifies for entitlement to use red diesel and exemption from vehicle excise duty, and in particular on the interpretation of 'purposes relating to agriculture, horticulture or forestry'.

HM Revenue & Customs and the Driver Vehicle Licensing Agency have been in discussions with the National Farmers Union, the National Association of Agricultural Contractors and the Confederation of Forest Industries to reach a common interpretation of legislation. These discussions have resulted in the publication of a Memorandum of Agreement on the use of agricultural vehicles on the road.

The purpose of this Memorandum of Agreement is to provide guidance to those engaged in agriculture, horticulture and forestry, and to agencies enforcing compliance with the legislation. Where disputes arise these will continue to be considered on an individual basis with regard to the relevant legislation.

Issued 10 January 2008