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rippled by the highest levels of vehicle taxes in the European
Union, some UK international hauliers are planning to register their vehicles in other EU countries to slash their tax bills and avoid paying the UK's crippling rates of VED. For many, flagging out is a last-ditch attempt to prevent their businesses from going under. They say their profits are sliding and costs are increasing: since cabotage became legal in July last year they've been losing contracts to foreign hauliers.
When Eddie Stobart announced at the end of last year that he was planning to base about
MUM50 vehicles in Belgium, he estimated the move could save him Urn—but he says: '1 find it sad even to think about taking registered vehides out of the UK economy and basing them on foreign soil. I don't agree with it—but I have no option. It's not a case of making bigger profits; it's more a case of survival." Lower continental VED would save him £150,000 a year, rising to nearer Dm when the diesel bills are taken into account.
Roy Harbour, owner of Offshore Transport Services, shares Stobart's disappointment that such action is necessary: "I'm British through and through," he says. "But I'm being sold down the river by my own Government."
Harbour, based in Scunthorpe, South Humberside, is planning to join forces with a small family-owned firm near Barcelona in Spain which, like him, specialises in abnormal loads. Registering some of his vehicles in Spain will cost him L460 per truck instead of the £1,280 VED he currently pays over here.
Foreign hauNers
Harbour claims foreign hauliers are undercutting his rates by as much as 20°4: he has lost work hauling paint to a German company because he simply couldn't afford to cut his rates any further.
John Clark, managing director of Doverbased reefer operation Clan International, reckons he is losing around to loads a week to foreign hauliers. He already has an Operator's Licence in Luxembourg and a Scania on order that will be based there. "We're going to suck it and see," he says. "We want to see how much cheaper it is to base a vehicle on the Continent than the U K."
Taxing the Scania 4-Series in Luxembourg Will save L400 a year—and as a bonus it is costing a whopping 15% less to buy than it would in the UK.
So far the flagging-out debate has hinged on the definition of the word "temporary" as it is used in the cabotage regulations. Vehicles are cov ered by these regulations if they are registered in one country and working in another temporarily.
For Stephen Kirkbright, a partner with solicitors Ford & Warren, the situation is clear: "Temporary means not permanent," he says. "It's not as stupid as it seems. If you have an 0-licence in Luxembourg and you spend all your time in the UK, the European Court would hold that not to be "temporary". They will take a pragmatic view and ask if you're using flagging-out as a fiction."
Great risk
And Kirkbright warns that you won't get away with holding your 0-licence in country A, working in country B and nipping back to A to get your trucks tested twice a year. "In order to avoid paying VED the regulations say a vehicle must be brought into a country by a resident from outside the UK," he says. Kirkbright strongly advises domestic hauliers against registering abroad and then working in the UK: "In my judgement domestic hauliers doing that are taking a great risk"
So flagging-out your vehicles might not be so easy after all. It certainly demands careful thought. To offset the savings on fuel and vehicle taxes, there are hidden costs including the Working Time Directive and employment law that need to be considered. "Some member states have already adopted the Working Time Directive more than we have, so you may not get labour at the same price as in the UK," warns Don Armour, road freight policy manager at the Freight Transport Association. He points out that some EU countries also charge for trailer registration.
And don't assume that if, for example, you're employing British drivers to drive Belgian-registered vehicles, their employment contracts will automatically be governed by employer-friendly UK law. Under the Rome Convention, which lays down the rules governing international contracts, the national laws which apply depend on where the business and the employees reside. "If your business is in Belgium you can't choose English law," says Kirkbight. "You can still employ Engish drivers, but they'll be employed under contracts subject to Belgian law."
The Department of Transport says it's in favour of cabotage because it supports the fundamental freedoms of the single market. But will it retain that relaxed view when the revenue from vehicle and fuel taxation is in the hands of other EU countries because many of the UK's 14,334 international 0-licence holders have registered abroad?
Flagging-out has generated so much interest from the industry that the Road Haulage Association has produced a free information pack for members on registering abroad.
Price increase
Since its launch several weeks ago. during which time hauliers have been hit with an 8.5% fuel price increase in the Budget, the RH A has received more than t,000 enquiries about the pack. Director-general Steven Norris says that if all those hauliers flagged Out, the Treasury would lose 127m a year in fuel and vehicle duties, while other countries gained some of that income.
But Kirkbright urges caution: "Don't do it unless you've done some thorough research."
For more details of the RH A/ Ford & Warren Flagging Out Service, contact 01132 970404. The service costs £1,00015,000 depending on the size of your fleet. It will advise on which country you should flag out to, what type of legal entity you should establish, how to get an 0-licence and how to set up shop in your adopted country.