When is a tractor not a tractor? asks the taxman

Another bizarre battle is brewing in the world of tax. Fresh from the hair
splitting of Richard, Judy and theatrical artists, HM Revenue & Customs is
now fighting farmers over the speed of their tractors.

The issue, in a nutshell, is that farmers now have quicker more versatile
tractors. Given that they go at 40mph, the new vehicles can be used to transport
cattle to market.

And while tractors used for agricultural purposes can use heavily discounted
red diesel, the new use is being disputed by HMRC as not qualifying for the
cheaper fuel.

Ian Fleming of Armstrong Watson has been raising the issue with HMRC for a
year, and recently won a case on the issue at a tribunal.

The MW Plant case, decided early last month, went in the taxpayer’s favour,
with the tribunal saying that the tractor fulfilled the definition of tractors
within the rules, that it was carrying out work relating to agriculture and that
it was entitled to use red diesel.

The vehicles in question in the case, a JCB Fastrac, was doing drainage work,
but Fleming says there is a broader assault on all work such ‘Rolls-Royce’
tractors may be doing. The case is one of several that have decided the issues
in the taxpayers’ favour, Fleming says.

But unfortunately for the farmers, the tribunals are not the end of the
matter. HMRC changed the rules in the Budget this year, subject to the Finance
Act going through, that will see farmers taking their cattle to market in this
way charged the full cost of ordinary petrol.

That is no small amount. Red diesel is around 50p a litre cheaper, and
Fleming puts the cost to farmers of the change at millions of pounds. ‘Customs
believe the system is being abused,’ Fleming says.

That seems an odd view. Apart from farmers taking advantage of vehicles to
transport cattle (previously they would have contracted such transportation out)
and making sensible business savings, it is hard to see precisely what abuse has
gone on.

When is a tractor not a tractor? A question that few of the world’s
philosophers have thought necessary to ask. But typically one of vital interest
to the taxman.

Related reading

Life Belt with Computer Folders