Last reviewed 22 January 2013

Neil Baylis of K&L Gates LLP looks at the further developments and implications of this Bill for the UK road haulier.


Since reporting on 24 October 2012 that Transport Minister Steven Hammond had announced the HGV Road User Levy Bill, the legislation has progressed through Parliament with broad cross-party support. With the Committee stage now complete, the Bill will return to the House of Commons for final debate, before passing to the House of Lords for approval. While sufficient support exists for the April 2014 commencement date to be met, details of the Bill remain subject to controversy.

In brief, the Bill proposes to levy a charge on all HGVs with a laden weight of 12t or more operating on UK roads. HGVs affected by the Bill and registered in the UK will enjoy an associated reduction in the amount of vehicle excise duty (VED), leaving the overall effect of the Bill on UK hauliers cost-neutral. The Bill therefore serves to impose a small extra cost on foreign-registered HGVs, going some way to tackle the inequality of UK hauliers paying to use many roads in mainland Europe while their foreign counterparts pay nothing to use UK roads.

Fines for not paying the levy

It would be an offence not to pay the levy, for which fixed penalties of up to £200 would be given; the maximum fine would be £5000 for cases reaching court. For foreign hauliers, the Government anticipates a roadside financial penalty deposit to be required in lieu of a fixed penalty. Such deposits were introduced under s.11 of the Road Safety Act 2006 to prevent offenders who are unable to prove a UK address from escaping a penalty. Failure to pay a deposit can result in a vehicle being clamped and towed. The levy is expected to raise in the region of £80 million between 2014 and 2018.

The payment, collection and enforcement of either an annual or six-monthly levy for UK-registered HGVs will be linked to the existing administrative system used for VED, thereby keeping the administrative burden of this new legislation to a minimum. Enforcement will be by means of electronic number-plate monitoring equipment operating at ports of entry; the scheme will therefore not involve the affixing of paper signs, or vignettes, to windscreens.

It is important to note that as the Government expects the first charging year to be 2014, the actual levy would be set out in the Finance Bill of that year. This Bill would also make provisions for the offset in VED, allowing the Government to vary the levy and VED in tandem. On a practical level, it is planned that as the scheme will start in April 2014, the haulier will pay the levy whenever VED falls due as that year progresses. Foreign hauliers will pay the levy immediately on commencement. Furthermore, liability to pay the levy for UK hauliers would align with liability to pay VED under the Vehicle and Excise Registration Act 1994, thereby minimising bureaucracy.

Controversial issues

Regarding issues of controversy, the first issue is that certain HGVs will not in fact find the effect of the combined levy and VED reduction to be cost-neutral. Figures published by the Department for Transport show that about 6500 vehicles fall under VED rates, which are already so low that reductions in VED to offset the levy would violate minimum EU VED rates. Roughly half of these vehicles are 28t 2+2 articulated vehicles. The maximum loss for conventional articulated or rigid HGVs without a trailer was calculated at £79 a year, while rigid vehicles towing a trailer, of which 40 were found, would suffer to the tune of roughly £300. Such costs could, however, be avoided by re-plating vehicles to carry a reduced weight.

The second point of controversy is the fact that the proposed legislation serves to equalise only a fraction of the broader imbalance in economic conditions experienced by foreign- versus UK-based hauliers. The European Vignette Directive imposes limitations on the daily rate chargeable on vignettes — stickers distributed by officials and displayed in vehicles to demonstrate payment of a time-based user charge. The Directive sets common rules on vignettes for HGVs, limiting any daily charge to a maximum of €11. However, there is provision for limits to be increased by inflation and rounded up to the next euro. The EU's maximum daily charge will have increased to €12 by the time the UK's HGV user charge comes into force, which is approximately £10. While the Government proposes to set the daily user charge at the maximum permitted rate, the £10 charge is still low considering that that sum permits a 40t HGV to travel a distance of around only 50 miles on a German autobahn, or 31 miles on a French autoroute.

The third issue arose with regard to liability to pay the levy and associated fines. Where the vehicle is registered in the UK, the Bill apportions liability to pay the levy jointly and severally to each person in whose name the vehicle is registered under the 1994 Act and to the keeper of the vehicle. Where the vehicle is registered outside the UK, liability is apportioned jointly and severally to each person holding a Community licence in respect of the vehicle, and to the keeper of the vehicle. Debate ensued concerning the merits of either the operator, keeper, driver or owner taking responsibility for payment, which remains unresolved at this stage.

The fourth point was the fact that several roads exist along the Northern Ireland/Republic of Ireland border that cross back and forth between the two countries. Travelling such routes would result in unfairly high charges due to repeated entry and exit into and out of the UK. The Department for Transport has suggested to the Irish Government the possibility of exempting certain roads from the charge, while implementing the rules at main crossing points; the issue remains unresolved.

Wider implications of this Bill

This Bill has the potential to lead to wider changes in the road haulage sector. The number-plate-reading equipment to be installed under the Bill enjoys clear cross-applicability with regards to the fight against flaunters of cabotage rules. This currently operates by limiting the number of domestic journeys that a visiting vehicle can make within the period of a week. As the authorities will be monitoring the dates of entry and exit of any cab into and out of the country, this data could easily be applied to the enforcement of cabotage rules.

Concern was raised, however, regarding the possibility that the equipment could also be utilised as a trial towards the possible future charging of tolls on all UK roads; indeed, the present Government currently has a proposal to charge tolls on the A14. Such charging would require similar equipment and data collecting, but the Government was quick to deny that the Bill served any purpose beyond the introduction of the vignette system.

Last, "legislative creep" was feared with regard to powers provided for in the Bill for the Secretary of State for Transport to vary, by vote in both Houses of Parliament, the vehicle-weight to which the levy applied. In this way, vehicles of a lower weight could eventually be covered by the vignette.

We will continue to cover this Bill as these issues are debated further in Parliament.