Fancy flagging out?
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Governments collect taxes in many different ways. For years the Exchequer has raised vast sums from vehicle excise duty (VED). This is perfectly lawful under international conventions and agreements within the European Union. But the result, as all hauliers know to their cost, is crippling rates of VED in the UK compared with every other EU state.
An operator of a two-axle tractor who wishes to haul 40 tonnes pays £5,750 a year in VED. His competitor in Spain would pay £375 a year, in Luxembourg 1357 and in Holland £630. Add to that crippling rates of duly and fuel, and the UK haulier has very heavy direct overheads compared with his Continental cousins.
The large hike in VED in the
last Budget caused many operators to consider flagging out. But what is flagging out? Is it easy? What does it involve?
In this issue of the Legal Bulletin we will examine what you can and can't do; what risks you take if you do it wrong; and how you can gain a commercial advantage.
The problem is complicated. When looking at flagging out, an operator has to consider not just VED, but also tax, Operator's Licence, international authorisation, VAT, social security payments, employees, finance agreements, capital allowances—and a mass of other factors.
Many operators have attempted to flag
out, some of them not completely. There have been very few prosecutions to date; but there have been a number of warning letters from the Traffic Commissioners.
Obviously any operator who wishes to take a risk in flagging out may do so. The purpose of this bulletin is to point out the potential pitfalls.
The basic rule of law is that every single vehicle, commercial or otherwise, foreignregistered or registered in the UK, must pay VED when used on a road in the UK unless it is exempt from payment of VED under UK legislation. There is no "double taxation" relief. The fact that you have paid duty in Holland does not automatically exempi you from paying duty again in the UK.
If you do not come within one of the specific exemptions, then on each and every occasion the vehicle is used on the road the operator is liable to conviction for using a motor vehicle without the appropriate vehicle excise duty. The maximum fine is five times the annual rate of duty. Magistrates also have the power to order back duty to the date the vehicle was last registered in the UK or, if it has never been registered in the UK, the date of its manufacture.
For a two-axle tractive unit carrying 40 tonnes or more, that would amount to a maximum fine of f27,75o plus back duty!
A conviction or fine of
that level would also mean an automatic loss of repute if the operator is an individual rather than a company, which means loss of Operator's licence—so take care.