HGV road user Levy Bill

These notes refer to the HGV Road User Levy Bill

as introduced in the House of Commons on 23 October 2012 [Bill 77]

Explanatory Notes

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introduction

1. These explanatory notes relate to the HGV Road User Levy Bill as introduced in the House of Commons on 23 October 2012. They have been prepared by the Department for Transport in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.

2. The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.

summary and background

3. Currently, operators of UK-registered heavy goods vehicles (HGVs) pay charges or tolls in most European countries for use of the road network in those areas. However, foreign-registered HGVs do not pay to use the UK’s road network. Over time, the different ways in which countries across Europe charge for use of their road network has created an imbalance that is unfair to UK operators.

4. The Bill seeks to address this by introducing a levy for all HGVs that weigh 12 tonnes and over for using the UK road network. The requirement to pay the levy will apply to all categories of public road in the UK and to both UK and foreign-registered HGVs.

5. The levy will be time based and will vary according to the vehicle type, weight and number of axles. It will range from £85 a year for the smallest HGV up to £1,000 for the largest. This seeks to ensure that the charging scale is linked to the amount of wear a HGV causes to a road.

Bill 77-EN

55/2

6. UK-registered HGVs will pay the levy for the same period and in the same transaction as they pay for vehicle excise duty. This means that they will pay for either six months or a year. Foreign-registered vehicles can pay the levy either daily, weekly, monthly or annually. Refunds will be available under certain circumstances. Revenues will be paid into the Consolidated Fund.

7. There will be associated reductions for UK-registered HGVs in the amount of vehicle excise duty that is payable. This is intended to mean that the vast majority of UK-based hauliers will pay no more than at present. Changes to vehicle excise duty will be included in the Finance Bill 2014.

8. The Bill makes it an offence to fail to pay the levy and, on summary conviction, a fine of up to level 5 on the standard scale (currently £5,000) will be payable. The Bill allows the Secretary of State to refuse to issue a vehicle licence (tax disc) if he is not satisfied that the appropriate levy has been paid.

9. The Government consulted on the proposals in January 20121.

10. The scheme will be administered by the Driver Vehicle and Licensing Agency (DVLA) or the Driver and Vehicle Agency (DVA) in Northern Ireland. A contractor will be appointed by the Department for Transport to administer the payment scheme for foreign-registered HGVs. The contractor will be required to maintain an electronic database of foreign-registered HGVs for which a levy has been paid. UK enforcement agencies will have access to the database.

11. The scheme will be enforced by the Vehicle and Operator Services Agency (VOSA) in Great Britain and the Driver and Vehicle Agency (DVA) in Northern Ireland. These agencies currently enforce UK and foreign hauliers’ compliance with regulations on vehicle roadworthiness, drivers’ hours and other road safety regulations. The police also have enforcement powers. The Bill will enable the enforcement agencies to issue a fixed penalty notice for the offence of not paying the levy at the appropriate rate, or to prosecute offenders in a magistrates’ court. The Secretary of State will use powers under Part IIIA of the Road Traffic Offenders Act 1988 to enable enforcement agencies to require payment of a financial penalty deposit, which will aid enforcement against those without a satisfactory UK address. Part IVA of the Road Traffic Offenders (Northern Ireland) Order 1996 is the equivalent for Northern Ireland of Part IIIA of the Road Traffic Offenders Act 1988.

12. Any charging scheme must comply with the relevant European legislation, the Eurovignette Directive (Directive 1999/62/EC as amended by Directive 2011/76/EU). This Directive ensures that Member States do not discriminate against foreign hauliers in the way they set levies, in order to safeguard fair competition within the European Union. It sets limits on the type of charges that can be introduced and limits on the levels of charges. The Bill is compliant with the terms of the Directive.

territorial extent

13. The Bill extends to England and Wales, Scotland and Northern Ireland. The subject matter of the Bill is reserved. This Bill does not contain any provisions falling within the terms of the Sewel Convention. Because the Sewel Convention provides that Westminster will not normally legislate with regard to devolved matters in Scotland without the consent of the Scottish Parliament, if there are amendments relating to such matters which trigger the Convention, the consent of the Scottish Parliament will be sought for them.

commentAry on clauses

Clause 1: Charge to HGV road user levy

14. The clause introduces the requirement to pay the HGV road user levy for each HGV that is kept or used on a UK road.

Clause 2: Meaning of "heavy goods vehicle"

15. This clause provides a definition of a HGV, which determines which vehicles are required to pay the levy. For the purposes of the levy, a HGV includes any vehicle of 12,000 kg or more, or any heavy motor car as defined by section 185 of the Road Traffic Act 1988, that is liable for vehicle excise duty in accordance with Part 6 (vehicles used for exceptional loads) or Part 8 (goods vehicles) of Schedule 1 to the Vehicle Excise and Registration Act 1994. In order to cover non-UK registered HGVs, the definition also includes those vehicles that would have been charged vehicle excise duty but for an exemption based on those vehicles being only temporarily in the UK.

16. It provides a power for the Secretary of State to amend by order the weight at which the levy will apply. The order must be made by way of a statutory instrument that must be agreed by the House of Commons through affirmative resolution.

Clause 3: Roads to which this Act applies

17. This clause states that the Bill will apply to all public roads in the UK. It provides a power for the Secretary of State, by order, to exclude particular roads. The order must be made by way of a statutory instrument that must be agreed by the House of Commons through affirmative resolution.

Clause 4: Liability for levy

18. The clause sets out who is liable to pay the levy in respect of UK and non-UK HGVs. For UK HGVs, this clause makes both the person in whose name the vehicle is registered and the person keeping the vehicle liable to pay the levy. This applies the same principle that is used for vehicle excise duty in section 1 of the Vehicle Excise and Registration Act 1994, which is important because the levy is to be paid in conjunction with vehicle excise duty. In the case of non-UK HGVs, the person who holds a Community licence for the vehicle and the person who keeps the vehicle are both liable to pay the levy. A definition of a Community licence is included in the clause. If two or more people are liable to the pay the levy, they are jointly and severally liable.

19. The clause also sets out that a person is not liable for the levy if their vehicle is stolen, sold or disposed of. If a vehicle is stolen from the registered keeper and subsequently used on a UK road, the keeper would be exempt from paying the levy after the day of the theft. If the vehicle is recovered, the liability of the keeper re-commences. Similarly, a keeper is no longer liable to pay the levy from the date of sale or disposal, so if that vehicle is used on a UK road after that date he or she will not be liable to pay the levy. If the levy has already been paid, the exemption in this clause does not apply, although a rebate under clause 7 may be available.

Clause 5: Payment of levy for UK heavy goods vehicles

20. This clause states that, for UK-registered HGVs, the levy must be paid for either one year or for six months and must be linked to payment of vehicle excise duty, which is also payable either annually or six-monthly. The levy must be paid at the appropriate rate for the type of vehicle as set out in Schedule 1.

Clause 6: Payment of levy for non-UK heavy goods vehicles

21. This clause states that, for foreign-registered HGVs, the levy must be paid for each day the vehicle is used or kept on a UK road. The levy can be paid daily, weekly, monthly or annually and must be paid at the appropriate rate for the type of vehicle as set out in Schedule 1.

Clause 7: Rebate of levy

22. The clause sets out the conditions for providing rebates. The entitlement will apply in cases where the levy has been paid for more than one month, and where at least one month of the levy period remains. Rebates will only be available in cases where the vehicle has been stolen, destroyed, is no longer kept or used on a UK road or has been sold.

23. The clause sets out how the rebate will be calculated. It also provides the Secretary of State with a power to specify conditions with which a person must comply before making an application. This may include the fact that information should be sent electronically, and stolen vehicles need to have been reported to the police. The clause also enables the Secretary of State to charge an administration fee for the rebate, and provides for the Secretary of State to make regulations to allow for rebates in other circumstances.

Clause 8: Exemptions and reductions

24. This clause exempts from payment of the levy certain rigid goods vehicles that currently pay vehicle excise duty at the basic goods vehicle rate. This clause also provides a power for the Secretary of State to make regulations that may exempt certain categories of HGVs from paying the levy, or provide that they may pay the levy at a reduced rate.

Clause 9: Collection of levy

25. This clause gives the Secretary of State and his or her officers powers to collect the levy. These are the same powers as those given to officers of Her Majesty’s Revenue and Customs. Revenues will be paid into the Consolidated Fund.

Clause 10: Power to stop

26. This clause gives officers appointed under section 66B of the Road Traffic Act 1988 the power to stop vehicles that appear to be HGVs in order to help enforce payment of the charge.  Stopping powers are used at present by enforcement agencies to enforce other requirements relating to issues like vehicle roadworthiness and drivers’ hours.  The clause deals with the stopping of vehicles in England and Wales and Scotland.  In Northern Ireland, vehicle examiners appointed under Article 74 of the Road Traffic (Northern Ireland) Order 1995 will have a power to stop by virtue of Article 180A of the Road Traffic (Northern Ireland) Order 1981.

Clause 11: Offence of using or keeping heavy goods vehicle if levy not paid

27. The clause makes it an offence for a person to use a HGV on the road where the levy has not been paid at the appropriate rate. This means that the primary offender will be the driver of the vehicle. However, the clause also provides that where an offence is committed, the person liable for paying the levy also committed an offence. The maximum penalty for non-payment on summary conviction is level 5, that is currently £5,000. Fine revenues will be paid into the Consolidated Fund.

Clause 12: Legal proceedings

28. This clause gives effect to Schedule 2 which sets out the arrangements for legal proceedings in England and Wales, Northern Ireland and Scotland to reflect the different arrangements in those countries.

Clause 13: Fixed penalties

29. This clause inserts the offence in clause 11 into Schedule 3 to the Road Traffic Offenders Act 1988, which the lists the offences for which fixed penalties can be imposed under Part III of that Act. This enables enforcement officers to give a fixed penalty notice ("FPN") to an offender. A FPN allows an offender to pay a fixed sum within a specified period to avoid prosecution for the offence. Fixed penalties are currently used for offences committed in respect of vehicle roadworthiness and drivers’ hours. The amount of the fixed penalty will be set using powers under section 53 of the Road Traffic Offenders Act 1988 to amend the Fixed Penalty Order 2000. The Road Traffic Offenders Act 1988 extends to England and Wales and Scotland only.  In Northern Ireland, provision about the issuing of FPNs is made by Part IV of the Road Traffic Offenders (Northern Ireland) Order 1996.  Fixed penalty offences in Northern Ireland are specified by an order made by the Department of the Environment in Northern Ireland under Article 57(2) of that Order.

30. It is envisaged that the Secretary of State will exercise powers under Part IIIA of the Road Traffic Offenders Act 1988 to amend the Road Safety (Financial Penalty Deposit) Order 2009 so that an enforcement officer may require a financial penalty deposit ("FPD") to be paid by a person who has committed the offence in clause 11 where the offender cannot provide a satisfactory UK address. The amount of deposit will be set by amending the Road Safety (Financial Penalty Deposit) (Appropriate Amount) Order 2009. If the FPD is not paid, a notice prohibiting the HGV from being driven on the road may be issued. The HGV may then be immobilised, removed or disposed of in accordance with the Road Safety (Immobilisation, Removal and Disposal of Vehicles) Regulations 2009. In Northern Ireland, provision about FPDs is made by Part IVA of the Road Traffic Offenders (Northern Ireland) Order 1996 and non-payment of a FPD can trigger immobilisation, removal and disposal of a vehicle by virtue of Schedule 1 to the Road Traffic (Northern Ireland) Order 2007.

Clause 14: Register of levy paid or due to be paid

31. This clause requires a register to be established which will keep a record of payments made in respect of each HGV. The register must show the registration number, the country or territory where the vehicle is registered and the period for which the levy has been paid, or for UK HGVs, the date from which the levy is next payable. The register must be available and free to view on a website to aid enforcement of the levy, and to enable a driver of a HGV to check whether the levy has been paid for that vehicle before using it on UK roads.

Clause 15: HGV road user levy and vehicle licences

32. This clause inserts a new subsection into section 7 of the Vehicle Excise and Registration Act 1994 which allows the Secretary of State to refuse to issue a vehicle licence (tax disc) for a HGV if the appropriate levy has not been paid. Failure to pay the levy will therefore result in an unlicensed vehicle. Using or keeping an unlicensed vehicle is an offence under section 29 of the Vehicle Excise and Registration Act 1994 and such a vehicle may be immobilised, removed and disposed of in accordance with the Vehicle Excise Duty (Immobilisation, Removal and Disposal of Vehicles) Regulations 1997.

Clause 16: Power to install equipment for the detection of offences under section 11

33. This clause amends the Highways Act 1980 which provides powers for the highway authority to install equipment for the detection of traffic offences and adds detecting non-payment of the HGV road user levy to the reasons for which such equipment can be installed. It also makes a corresponding amendment to the Roads (Scotland) Act 1984 and the Roads (Northern Ireland) Order 1993.

Clause 17: Regulations

34. Clause 17 provides the Secretary of State with a general power to make regulations for the purpose of carrying into effect the provisions of the Bill. These regulations are subject to agreement by the House of Commons under the negative resolution procedure. This clause also enables regulations made under the regulation making powers in the Bill to make different provision for different cases or circumstances including for different parts of the UK, and to include incidental, consequential and supplemental provisions.

Clauses 18 to 22

35. These clauses relate to orders (clause 18), interpretation (clause 19), territorial extent (clause 20), commencement (clause 21) and the short title (clause 22).

financial effects of the bill

36. A Tax Information and Impact Note has been published alongside the Bill and is available on the Department for Transport’s website at www.dft.gov.uk. It shows that the impact on the Exchequer is estimated to be between:

2013-14 -£5 million to -2.5 million

2014-15 +£18.7 million to +£23.2 million

2015-16 +£18.7 million to +£23.2 million

2016-17 +£18.7 million to +£23.2 million

2017-18 +£18.7 million to +£23.2 million

37. The estimates are based on planned start dates of April 2014 for UK hauliers and the same for foreign hauliers.  If procurement for the system for charging foreign hauliers cannot be completed in time, the start date will be pushed back, with a consequent reduction in revenue in 2014-15.  This compares with a March 2015 start date for foreign hauliers assumed at the time of the consultation. The net revenue has been calculated on the basis of the gross revenue raised by the levy, minus the costs of administration, enforcement and the forecast costs of corresponding changes to vehicle excise duty. It includes estimated revenues from enforcement activity. It is anticipated that initial set-up costs would occur mainly in the year 2013-14.

38. The Bill is not expected to have an impact on public sector manpower. It is estimated that set-up costs for the public sector would be between £3 million and £6.7 million, and annual administration and enforcement costs would be between £3 million and £4.8 million. These will be offset by the estimated gross revenue of around £27.6 million per year from foreign hauliers.

39. The introduction of the HGV road user levy and the associated reductions in vehicle excise duty are expected to be broadly revenue neutral for UK hauliers. It is expected that the around 98% of the current UK HGV vehicle fleet of 12 tonnes or over will pay no more than around £50 extra a year and 94% will pay nothing extra at all. UK hauliers will pay the HGV road user levy at the same time as they pay vehicle excise duty in one payment using the same form. The introduction of the levy should not therefore place any extra administrative burden on small firms.

european convention on human rights

40. The Government considers that the HGV Road User Levy Bill is compatible with the European Convention on Human Rights ("ECHR"). Accordingly, the Rt. Hon. Patrick McLoughlin MP has made a statement under section 19(1)(a) of the Human Rights Act 1998 to this effect.

41. Further explanation of the key human rights issues is provided below. Reference to Articles are to Articles of the ECHR.

Article 1 Protocol 1 of the ECHR ("A1P1")

42. In some instances, some of the interferences from the imposition of the levy (clauses 5 and 6) and its enforcement (clauses 13 and 15) may engage A1P1. For example, the payment of the levy itself; or where a HGV is seized, the disposal of that vehicle if it is not claimed with a specified time period; or where an HGV is immobilised or impounded, the release of the vehicle only when certain requirements have been fulfilled.

43. Where A1P1 is engaged in relation to imposition of the levy, it is the Government’s view that such interference is necessary to ensure that HGVs pay a fair contribution towards the maintenance of the UK road Network and is prescribed by law. The amount of the levy payable for a particular vehicle is determined by the weight of the vehicle and the number of axles over which that weight is spread, which will ensure that the amount paid for each vehicle is proportionate to the damage that vehicle does to the road network.

44. Where A1P1 is engaged in relation to the enforcement of the levy, it is the Government’s view that such interference is necessary to secure the payment of a tax and is prescribed by law. The aim of these provisions is to ensure that the levy can be adequately enforced, so that all HGV operators pay for their use of UK roads. The legislation under which the levy is to be enforced includes procedural safeguards and compensation measures, which will ensure that the levy and its enforcement is both justified and proportionate.

Article 14 (Prohibition of Discrimination)

45. On the face of the Bill, a distinction is made between UK and non-UK HGVs. Operators with HGVs registered in the UK are required to pay the levy on an annual or six-monthly basis at the same time as they pay their vehicle excise duty. This has been designed to keep the administrative burden on operators and the Government to a minimum and reflect the regular road usage of UK hauliers. Where a UK haulier no longer wishes to use a vehicle on the road, he or she can complete a Statutory Off-Road Notification and will be entitled to a rebate of the outstanding levy. Operators with HGVs registered outside the UK may pay the levy daily, weekly, monthly or annually. The wider choice available for foreign hauliers enables payment to reflect their actual use of UK roads, and is a requirement of EU legislation1. Any discrimination against UK hauliers on the basis of their restricted choice of payment period is justified on the basis that it reduces administrative burdens and better reflects their road usage.

46. The rates of the levy for a vehicle vary depending on the period for which it is paid. The monthly and weekly rates are 10% and 5% of the annual rate respectively, and the daily rate is either 2% of the annual rate or £10, whichever is lower. Operators with HGVs registered outside the UK that choose to pay on a monthly basis, for example, will therefore pay more for that month than a UK operator will pay on an equivalent month at the annual rate. For example, if a UK haulier pays an annual levy of £1,000, he or she is paying a monthly equivalent of £83.33, while a foreign operator will pay £100 (10% of the annual levy). Although a foreign operator may choose to pay annually, it is more likely that foreign operators will choose to pay monthly, weekly or daily because of the limited period for which they will use UK roads. A higher rate of the levy for these periods is imposed because of the significant administrative costs of establishing and maintaining a system of payment, collection and enforcement of the levy for vehicles registered outside the UK and for periods of time shorter than one year. The payment, collection and enforcement of an annual or six-monthly levy for UK registered HGVs are linked to an existing administrative system used for vehicle excise duty and therefore impose a smaller relative cost. Any discrimination against foreign hauliers is therefore justified on the basis of the greater costs of administering the levy for shorter periods of time and for vehicles not registered in the UK.

commencement

47. The Act will come into force on the date specified by the Secretary of State in an order made by statutory instrument.