One of the UK's largest hemp farms, Hempen, expects to lose about £200,000 of sales by destroying its crop after it says it lost its licence to grow it.
Last year, the Home Office said UK farmers could not harvest hemp flowers for cannabis oil, or CBD, but could continue to grow seed and stalk.
However, last Thursday the Home Office told the firm that it would have to cease production entirely.
The Home Office said it does not comment on individual licences.
Hempen's licence is in the name of its director James Norman, who is the farm's tenancy holder.
Hempen said it was being unfairly penalised and would appeal. It also criticised a "lack of clarity" in government regulation.
Following Home Office guidance last November, Oxfordshire-based Hempen said it had stopped growing Hemp for CBD purposes.
It instead focused its growing efforts on seed and stalk, which can be used to make cold-pressed seed oil and hemp flour among other products.
The not-for-profit business said it had then reapplied for its hemp grower's licence - which it had held for three years - in December. However, last week it was rejected.
The farm says it started the destruction of its crop on Monday to remain within the law.
The company employs 12 people and also uses some casual staff. It hopes to avoid job losses by changing its product offering and continuing to supply CBD by importing it from a European partner, which is legal.
The plants are being cut down and crushed by a tractor over the farm's 40 acres of hemp fields.
Hempen co-founder Patrick Gillett said: "In challenging economic times for British farmers, hemp is offering green shoots of hope as a rare crop that can pay for itself without subsidy.
"Instead of capitalising on the booming CBD industry, the Home Office's bureaucracy is leading British farmers to destroy their own crops, and millions of pounds' worth of CBD flowers are being left to rot in the fields."
He added that he felt the Department for Environment, Food and Rural Affairs should take over responsibility of regulating farmers from the Home Office.
What is hemp?
Hemp is a strain of the cannabis plant that contains little or no tetrahydrocannabinol (THC), but does contain CBD.
THC is the part of the plant that gets people high, which is something that CBD cannot do because it has no psychoactive effect.
Hemp is used for a wide variety of things, including fibreboard, environmentally-friendly plastic substitutes and - outside the UK - for food. It can be turned into everything from clothes to shoes, paper, animal feed and building insulation.
UK hemp-growing rules
The Home Office has various rules and conditions for people to grow hemp in the UK
- They must have a licence which usually costs £580 or £326 for a renewal
- Contact details must be provided, along with the location and hectarage of the field where the hemp will be grown
- The Home Office needs to know the seed type used and confirmation of whether it is approved by the EU
- Growers must undergo a Disclosure and Barring Service (DBS) check
- Crops may have to be screened or grown sensitively, for example not near schools or areas of public access
Source: Home Office website