Kieran Coughlan: Contractor eligibility is unclear under new fuel subsidy scheme
The average dairy farmer uses about 6,000 litres of diesel per year and typically about half of that is used in the period March to July, writes rural tax advisor Kieran Coughlan.
The Government announced the Fuel Subsidy Support Scheme in recent weeks to assist farmers and agricultural contractors in meeting the increased cost of agricultural diesel.
The Fuel Subsidy Support Scheme is subject to State Aid approval and also requires the implementation of an IT system in order to facilitate applications and payments.
It is expected that applications will be made via the Agfood portal for farmers, but it is unclear as of yet how agricultural contractors will make their applications, particularly contractors who are not farming, or who are farming via a separate legal entity (e.g. via a company) than their farming operations, which is often the case.
The scheme will provide €20 million per month in supports, with funding directly linked to fuel usage last year to ensure those most impacted by the fuel price increase receive the greatest assistance.
Again, some questions arise where there has been a change in legal ownership over the past year, either as a result of transitioning the business to a company or, more commonly, where a farmer has retired and transferred their holding to a successor.
It is hoped that the scheme will be flexible in such circumstances, as was historically the case with the Temporary Business Energy Support Scheme which was operated by Revenue.
The wording of the Department of Agriculture press release indicates that relief will be given to farmers and full-time agricultural contractors. It is not clear from this messaging whether part-time agricultural contractors, or agricultural contractors who may be operating in other sectors such as construction, will be locked out of the scheme.
In many cases, agricultural contractors may take on other commercial projects such as site clearance, dump trailer work or hedge cutting for non-agricultural customers, and it would be a great disservice to those agricultural contractors to be locked out entirely from any such support scheme as a result of what may be a minor element of their business.
The scheme is designed to pay out approximately 20c/litre on green diesel, by reference to diesel purchases made in 2025. It is expected that the reference to 2025 purchases is to prevent abuse of the scheme, where farmers or agricultural contractors would overbuy diesel and perhaps engage in the re-sale of diesel, benefiting from the rebate in the process.
The information needed to make an application is expected to consist of a herd number or other identifier such as a tax reference number or company tax number, invoices for 2025 diesel purchases and 2026 diesel purchases between the months of March to July, a tax clearance certificate for the business, and confirmation that the total benefits conferred on the farmer does not breach State Aid limits.
The average dairy farmer uses about 6,000 litres of diesel per year, and typically about half of that is used in the period March to July, as spring field work, silage and slurry spreading are diesel-intensive operations. Taking this typical example, a farmer might expect to get €600 back under the Fuel Subsidy Support Scheme.
Agricultural contractors’ diesel usage can run into hundreds of thousands of litres, depending on the size of the operation and, again, a substantial part of this fuel usage is in the peak busy times of March to July, meaning the rebate available to agricultural contractors could, in some cases, run to five-figure sums.
Farmers should be on the watch out for the scheme, the conditions surrounding it and, in particular, any exclusions from the scheme.
In the meantime, it would be worthwhile getting one’s homework in order, having 2025 and 2026 invoices to hand, along with tax clearance, as fuel distribution companies are likely to be overwhelmed with customers looking for copies of fuel invoices once the scheme opens.
Tax clearance, once granted, generally remains in place for months or even years. Again, this is something that farmers and agricultural contractors can put in place at this stage with the help of their accountant, if needed, ahead of and in anticipation of the scheme.
- Kieran Coughlan is a specialist in farm tax advice and is Principal at Coughlan Accounting & Taxation Services Limited. Kieran is a Chartered Tax Adviser (CTA) and Fellow of ACCA.
