Our client is a long-established small family-owned business who own and operate a drilling rig and transporter vehicle. In 2003, he was granted an exemption under paragraph 10 of Schedule 1 of the Hydrocarbon Oil Duties Act 1979, to the effect that his rig and transporter fell within the ‘digging machine’ exemption was thus able to use rebated gas oil (Red diesel).
In December 2014, our client replaced his transporter vehicle and again applied to HM Revenue & Customs (HMRC) for written confirmation that the rig and new transporter was exempt, as was his previous vehicle. However, despite the earlier confirmation, HMRC declined the application, deciding that the vehicle was not “designed and constructed as a digging machine” and that “the vehicle and drilling machine cannot be… a single, qualifying vehicle…”
Rejecting HMRC’s decision, Cartwright King looked to HMRC Excise Notice 75 which sets out HMRC’s own guidance on digging machine exemptions: “where drilling rigs are transported on another vehicle, the combination…would qualify…” provided that “the transporting vehicle was designed and constructed solely to accommodate and facilitate…specific digging/drilling unit.” The client’s rig was entirely dependant upon the transporter vehicle for its operation and the vehicle had no other purpose than to transport it. An application was made to HMRC for a formal review in January 2015.
HMRC upheld the original decision in March 2015 on the basis that the vehicle in its entirety “cannot be classed as a digging machine as it was constructed as a transporter vehicle.” Consequently, the actual digging machine itself can use red diesel, but not the lorry transporting it. In March 2015, an appeal was lodged to the First Tier Tribunal (Tax Chamber). Watch this space.
Cartwright King are national transport lawyers and can assist with any red diesel enquiries that you may have. Contact the team for free initial advice on 0845 894 1622 or email email@example.com.