Revenue Note for Guidance

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Revenue Note for Guidance

664A Relief for increase in carbon tax on farm diesel


This section allows farmers an income tax deduction in computing the profits of their farming trade for the increased costs of farm diesel used in that trade which are attributable to the increase in the rate of carbon tax on such diesel from 1 May 2012.

Farm diesel used by a farmer in the course of a farming trade is a deductible cost and, as carbon tax is included in the cost of that diesel, a farmer obtains a deduction for the amount of the carbon tax incurred on the purchase of farm diesel.

As the deduction provided for in this section is in addition to the deduction for the cost of farm diesel, farmers are entitled to a double deduction for the increased carbon tax they incur on farm diesel purchased on or after 1 May 2012.



(1) Subsection (1) sets out the definitions underpinning the section. The following should be noted.

carbon tax” means the carbon charge referred to in section 96(1A) of the Finance Act 1999. The carbon charge on mineral oils was introduced by section 64 of the Finance Act 2010 and is included in the rate of mineral oil tax charged on mineral oil.

farm diesel” is not defined in mineral oil tax legislation but falls within the heading “Other heavy oil” in schedules 2 and 2A of Finance Act 1999, which also includes home heating oil. Home heating oil is, however, specifically excluded from the definition of “farm diesel” for the purposes of this section.

relevant carbon tax” means the additional amount of carbon tax included in the cost of farm diesel as a result of the increase in the rate of carbon tax from 1 May 2012. It is determined by the formula “A – B” where “A” is the actual amount of carbon tax included in a farmers tax-deductible farm diesel costs and “B” is the amount of the carbon tax that would have been included in the cost of the same quantity of farm diesel if the carbon tax had been charged at the rate of €41.30 per 1,000 litres, (i.e. the rate which applied to farm diesel immediately prior to 1 May 2012).

Deduction for additional carbon tax

(2) A person entitled to a deduction for farm diesel in computing the profits or gains of their farming trade is entitled to a further deduction in computing those profits or gains of an amount equal to the additional carbon tax charged on that farm diesel as a result of the increase in the rate of the tax from 1 May 2012 (i.e. the relevant carbon tax described in subsection (1).

Relevant Date: Finance Act 2021