HGV Training Blog

Operator CPC Training

We now move into week 13 of our guide to Operator CPC in conjunction with E.P. Training. This week, we’re investigating the topic of vehicle taxation and the associated charges and licences.

Most mechanically propelled vehicles used or kept on the public highway must possess a road fund licence. Any vehicle going to or from an MOT test would be exempt from excise duty, providing an appointment had been made.

When a vehicle is first registered, the following documents and payments must be sent to the Driver and Vehicle Licensing Agency (DVLA) or to a Vehicle Registration Office (VRO):

• Form V55
• The correct fee
• Suppliers invoice
• Valid certificate of insurance
• Certificate of conformity

A registration document (V5) will then be issued, along with a road fund licence valid for either 6 or 12 months.

The seller is responsible for notifying the DVLA immediately following a change of ownership via section 1 of the V5. Additionally, the seller must supply the new keeper with section 2 of the V5. The new keeper will retain section 2 until they have received a new V5 from the DVLA, identifying them as the new vehicle owner.

For a transfer to a motor trader, both parties must inform DVLA using section 3 of the V5.

To ensure subsequent road fund licences are paid for and issued on time, the DVLA will send the vehicle owner a renewal reminder (V11 or V85/1 for articulated vehicles operating at a concessionary rate). V11 renewal reminders may be either presented to a post office for licensing or processed online. Licences for articulated vehicles that fall under the scope of a V85/1 reminder can only be licensed at a VRO.

In order to successfully receive a road fund licence, the following documents are required:

• Registration document (V5)
• Forms V11 or V85/1
• MOT test certificate if appropriate
• Valid certificate of insurance
• The correct fee

In order to receive a refund for any unused or partially unused road fund licence, the vehicle owner would need to send the licence and a completed form V14 direct to the DVLA.

Assessment For Excise Duty

For the purposes of taxation, all vehicles are grouped into different classes which are scaled according to their gross vehicle weight (GVW), vehicle/trailer combination and the number of axles:

Private and light goods vehicles up to 3500 kg (PLG) will pay a fixed rate of road tax.

Goods vehicles up to 12,000 kg GVW will pay according to the gross weight.

Goods vehicles exceeding 12,000 kg GVW will pay according to their gross/train weight and the number of axles.

Vehicles exceeding 12,000 kg pulling trailers exceeding 4,000 kg GVW (semi or drawbar) will have to pay additional duty in respect of the trailer.

The normal rule is that the greater the number of axles, the less duty is payable. Let’s look at some examples:

• A 38 tonne vehicle operating on 6 axles would pay less duty than a 38 tonne vehicle operating on 5 axles.

• A 2 axle unit drawing a 3 axle semi trailer at 38 tonnes GVW would pay more duty than a 3 axle unit and a 2 axle semi trailer at 38 tonnes.

When operating with different axle configurations, the highest duty category would have to be paid.

Vehicle that have been certified as producing less in the way of harmful emissions, qualify for slightly lower rates of vehicle excise duty.

Offences and Penalties

Failure to have correct excise licence – Maximum Fine: £1000 or 5 times the annual duty, whichever is the greater

Failure to display a current disc – Maximum Fine: £200 (display on near-side of windscreen)

Forgery or giving false information – Maximum Fine: £5000 or up to 2 years imprisonment

Obscuring or failing to display a number plate – Maximum Fine: £1000

Trade Plates

Trade plates are only issued to motor traders and vehicle testers and can only be used by the holder. Trade plates can be used for the following:

• Testing of vehicles
• Proceeding to a weighbridge or test centre
• Demonstration purposes
• Delivery of vehicles

Applications for trade plates are made to the local VRO (VTL 301 first application, VTL 305 for renewals). When the trade plates are in use, they must be fixed to the front and the rear of the vehicle. Each plate has red registration marks on a white background, and the front plate has a frame for the licence.

The maximum fine for incorrect use of trade plates is £1000 or five times the annual duty that is relevant to the incorrect use, whichever is the greater.

Recovery Vehicle Licence

What is a recovery vehicle?

A recovery vehicle is defined as “a vehicle which is either constructed or permanently adapted for the purpose of lifting, towing or transporting a disabled vehicle”.

Again, applications for recovery vehicle licences are made to the local VRO. The documentation required is the same as for a standard road fund licence.

Recovery vehicle owners have the option of paying for a full road fund licence (allowing unrestricted use) or taxing the vehicle solely as a recovery vehicle and therefore limiting road use. Under this type of licence, the vehicle owner would only be permitted to recover broken down vehicles, undertake carriage duties for loads/passengers within broken down vehicles or attend to roadside repairs. The vehicle owner would not be allowed to collect vehicle parts for those repairs.

Statutory Off-Road Notification (SORN)

Should a vehicle need to spend time off- road and untaxed, the DVLA still needs to be informed via a statutory off-road notification. Once a declaration has been made to the DVLA, no further action is required until the next SORN or road fund licence is due for renewal.

Rebated Fuel Oil

Diesel engine road vehicles must use fuel on which the full rate of duty has been paid (DERV) or alternatives such as liquefied natural gas (LNG) or biodiesel where suitably modified. HM Customs and Excise is empowered to check vehicles for the presence of rebated fuel such as red diesel or kerosene.

Operator CPC Training

Welcome to part 12 of our Operator CPC guide in conjunction with E.P. Training. This week, we’ll conclude the subject of accounting for VAT before moving on to vehicle taxation next week.

In part 1 of accounting for VAT we looked at typical examples of purchase and sales invoices and how the 3 rates of VAT (standard, reduced and zero rated) are presented. What happens though, if you undercharge or overcharge a customer?

Once an operator has generated and sent an invoice, it cannot be amended. In order to adjust the amount charged to a customer, a credit or debit note would be issued:

• If a customer has been overcharged, a credit note including VAT would be raised
• If a customer has been undercharged, a debit note including VAT would be raised

In both cases, these additional notes would be raised and sent to the client and copies would be kept for accounting purposes.

Records and Accounts

All operators must keep complete records and accounts of all taxable goods and services received and supplied as part of the day to day running of the business.

These records must contain enough information to allow for VAT to calculated and paid to HMRC correctly. All records must be made available to revenue officers in the event of an inspection. VAT records must be kept for at least 6 years.

This information must include:

• Supply of goods or services received from supplier. VAT must be clearly shown
• Overseas services received
• EU acquisitions, importations or removals from warehouse
• All business supplies (including zero rated or exempt supplies)
• Exported goods
• Gifts or loans of goods
• Taxable self supplies (for example, cars)
• Business goods acquired or produced put to private or non business use

VAT Returns and Payments

For every tax period, HMRC will send a VAT return (form VAT 100), which must be completed and sent back.

The standard tax period is 3 months. A tax return must reach HMRC no later than 1 month after the end of the tax period. For example, if the tax return relates to the period between June and August, the return must be submitted by the end of September.

Annual Return

If you have been registered for VAT for at least 12 months and the annual value of your taxable supplies (excluding VAT) is between £150,000 and £600,000, you may use the annual accounting system.

This system allows for operators to make 9 monthly payments by direct debit, based on an estimate of the amount of VAT due and sending an annual return with a tenth balancing payment, due two months after the end of the year.

Companies that use the VAT cash accounting system will not need to pay VAT on invoices until they have been paid by the customer.

Administration of VAT

From time to time an operator will receive a visit from a VAT inspector. During the visit they will:

• Give an indication of the length of the visit
• Discuss the various aspect of the business
• Examine the records of the business
• Advise on over and underpayments

Recovery of VAT Incurred Overseas

Under the EU Eighth VAT Directive, operators who are registered for VAT in their home member state are able to reclaim VAT incurred in all other member states.

The easiest way to do this is to use a recognised international fuel card, or use an agent to recover the VAT.

Other Payments to HMRC

Employers must also make the following payments each month to HMRC:

• The employer’s National Insurance (NI) contributions
• The NI contributions deducted from the employees’ pay
• The PAYE tax deducted from the employees’ pay

Pay As You Earn (PAYE) payments are made to HMRC 1 month in arrears, so January’s amount must be paid over by February and so on.

Company Benefits

Additionally, HMRC will tax ‘benefits in kind’ (company cars, health insurance, free loans, etc.). The extra tax is collected by amending the employee’s personal tax code.

Each year HMRC will set a maximum, allowable figure for unpredictable income (night out money, tips, etc.). If the employee receives this sum, there will be no tax liability but if the employee receives a higher amount, there is an additional tax liability.

Self-Employed

When employing self-employed workers, operators have no responsibility for paying their NI contributions.

A self-employed worker is not subject to PAYE and is taxed in arrears like large businesses, making class 2 and 4 contributions.

Corporation Tax

Corporation tax is the tax payable by limited companies on annual adjusted net profits. Corporation Tax begins at 20% and increases to 24% and 40% depending upon the level of profits made. Small companies can take advantages of capital allowance of 40% on new equipment in the first year of purchase. Accountants will be able to advice on these incentives.

A business must file annual returns with HMRC which include their trading account, profit and loss account and balance sheets. A company has 9 months from the financial year end in which to pay its corporation tax dues.

Operator CPC Training

Over the next few weeks, we’ll be looking at fiscal law which will include the subjects of basic accountancy procedures, taxation and road charging.

We’ll start with a look at VAT and the various associated accounting procedures a well informed road transport manager will need to be familiar with.

What Is VAT?

Value Added Tax (VAT) is a tax that’s charged on the supply of most goods and services, although there are some exceptions. VAT law is governed by a number of directives established in the European Union.

The 6th VAT Directive in 1977 was brought into effect in the UK by the Value Added Tax Act 1994. Copies of the various VAT acts and statutory instruments are available from HMSO.

It is the responsibility of a VAT registered operator to ensure that tax is charged and collected on behalf of the UK government via company sales invoices.

A taxable customer can be either an individual or a company. Anyone who has a taxable turnover above a set amount, usually referred to as a taxable threshold, is legally required to be registered for VAT. The threshold is usually reviewed annually and set by the government.

Once registered, HMRC will issue a registration number. This number is unique to the company and contains a series of 9 digits which will be the reference number for returns and other HMRC enquiries. Sales invoices must also display the registration number.

Companies whose turnover is below the taxable threshold do not need to register for VAT. However, it may be in their interests to do so in order to offset sales and purchase invoice taxes.

Registered individuals or companies will be required to pay their VAT dues quarterly. As mentioned above, the amount due is calculated by subtracting the VAT payable (input tax on purchases) from the VAT on services (output tax on sales).

For example, in the first quarter of 2013, ABC Hauliers generated £50,000 of VAT from their sales and had to pay VAT on purchases totalling £30,000. The amount due to HMRC would therefore be £20,000.

Accounting For VAT

The procedures for accounting for VAT will mainly depend on the circumstances of the transaction. Let’s take a look at some examples below:

• If the operator and the place of supply are located within the same EU member state, the operator will be responsible for the accounting and charging of VAT.

• If the place of supply is located within a different EU member state due to the location of the customer, then it will be the responsibility of the customer to account for the VAT as a reverse charge.

• An operator may need to be prepared to register for VAT in another EU member state if the place of supply moves to where the transport of the goods for a private individual begins.

• If the place of supply is outside of the EU then it is classed as being outside of the scope of VAT and no tax will be charged.

• For cabotage operations within the EU, the haulier will have to register or appoint an agent in the host country and charge VAT at the host country’s rate

From 1st January 2010, the general rule is that the place of supply is the place where the customer is based for the purpose of receiving the supply. It does not matter where the goods are being transported, moved from or to, or where any related service physically takes place.

VAT Liability

There are currently three rates of VAT applicable in the UK; the standard rate of 20%, a reduced rate of 5% for domestic fuels and a zero rate for items or services which are not subject to tax.

VAT Invoices

Whenever standard rated goods or services are supplied to another registered person or company, a VAT invoice must be issued. VAT invoices must contain the following information:

• An identification number
• The company name, address and VAT number
• The time of supply
• The date of issue (see tax point date below)
• The customer’s name and address
• The type of supply
• A description which suitably identifies the goods or services supplied

If a VAT invoice is issued which includes supplies that are either zero rated or exempt, it is essential that those items show clearly that there is no VAT payable and that their values must be totalled separately.

Output Tax – Sales Invoices

Output tax is the VAT due on any sales invoices that contain a taxable supply at the standard rate of VAT to the customer.

Input Tax – Purchase Invoices

Input tax is the VAT charged on business purchases and expenses. It is the amount the supplier will charge on their invoices for goods or services.

In order to reclaim VAT charged on purchase invoices, operators will need to provide documented evidence that they have invoiced customers and received purchase invoices from their suppliers in the stated time period. It is therefore essential to ensure that sales and purchase paperwork is kept in order.

Time Of Supply (Tax Point)

It is common for VAT invoices to refer to a tax point date. This is usually the date the invoice was generated. A VAT invoice must be raised and sent to a customer for their own records.

When the tax point is entered on the invoice, the VAT for that particular date must be accounted for within the correct quarterly return, even if the invoice refers to services outside of that time period.

Operator CPC Training

This week, we’re moving on to the Road Transport (Working Time) Regulations. Some of this content will be familiar following our feature on the general working time of drivers’ hours regulations in week 7. However, the provisions and entitlements of the Road Transport (Working Time) Regulations are slightly different and what follows is a breakdown of those rules.

Road Transport (Working Time) Regulations Main Provisions

 An average 48 hour week with no opt out available
 A maximum of 60 hours in any single week
 A 10 hours limit at night, in any given 24-hour period. However, this limit can be increased with worker agreement
 A reference period is a 4 month fixed calendar period which again can be increased with agreement

Let’s look at some of the main definitions of the regulations:

Mobile Worker

Mobile workers are personnel travelling in vehicles subject to the EU Drivers’ Hours Regulations. Mobile workers will include: drivers, porters, draymen, attendants, drivers’ mates and security staff.

Occasional Mobile Worker

Personnel who drive for less than 16 days in a 26 week reference period or fewer than 11 days in a shorter reference period that isn’t covered by the Road Transport (Working Time) Regulations are referred to as occasional mobile workers. Fitters, mechanics, warehousing personnel and transport managers fall under this category. Any opt out agreement under the main Working Time Regulations by occasional mobile workers is superseded by Road Transport (Working Time) Regulations provisions.

Agency/Employment Business Drivers

In this category, the agency or employment business will be responsible for monitoring working time and keeping records. Where workers are employed through an employment agency and have a contract with the hirer, the hirer must take on the responsibility. Where there is doubt as to where the contract of employment lies, whoever pays the worker will be responsible for regulation compliance.

Working Time

Working time includes all normal driving, work related duties and job related training. However, working time does not include evening classes or day release classes, breaks, rests, periods of availability (see below) or travel to and from the place of work.

Voluntary Work

Non paid work does not count towards working time although guidance does suggests that employers should bear these activities in mind in relation to health and safety and road safety.

Period of Availability (POA)

A period of availability refers to waiting time known in advance by the worker. The worker does not have to remain at their workstation, although they may need to for reasons of security or safety, but they must be available to answer calls to start work or resume driving at the employer’s request.

As mentioned above, the duration should be known in advance either before departure or just before the start of the period in question. Workers do not need to be formally notified about a POA or its likely duration – it is enough to simply ‘know’ about it.

Periods of availability do not include delays due to road closures, diversions, or congestion as the worker will still be driving as part of this classification.

Weeks and Fortnights

The duration of a week or fortnight for the Road Transport (Working Time) Regulations matches those of the Drivers’ Hours Regulations.

Staff with Two or More Employers

Mobile workers must advise employers if they work for someone else, even if the work is not driving related. Employers must ask the mobile worker to declare if they are working for another employer in writing and they must account for the time worked elsewhere.

The hours a worker completes for another employer must also count towards their weekly limits. If appropriate, a worker may also need to have a different reference period for their main employer.

Weekly limits

In a nutshell the limits are 48 hours averaged over the reference period or 60 hours maximum in any single week.

These rules can be lifted in emergency circumstances as long as road safety is not compromised and they allow a driver to get his vehicle to a safe place. Operators are advised not to disapply these requirements on a regular basis.

Reference Periods

A Reference period lasts for 17 weeks but can be increased up to 26 weeks should the extension be mutually agreed with mobile workers.

Driver Certificate Of Professional Competence (Driver CPC)

Before we move on to next week’s topic of accounting for road transport managers, now is a good opportunity to briefly look at Driver CPC.

As a result of EU Directive 2003/59, professional drivers now need to demonstrate and prove their skills and knowledge by undertaking a total of 35 hours statutory training every 5 years. Driver CPC was first introduced for PCV drivers in September 2008 and LGV drivers in September 2009.

New drivers acquiring these entitlements will need to undertake four stages of training to obtain their professional licence:

1A Theory test
1B Hazard perception test
2 Case study screen-based test
3 Practical driving test
4 Associated knowledge test

Once a driver has completed the above modules, they are issued with a Driver Qualification Card (DQC) which is valid for 5 years. The qualification is subsequently renewed by completing 35 hours of approved training every 5 years.

Existing drivers are exempt for the first 5 years from holding a card, but will have to accumulate the same 35 hours of training before the deadlines expire (September 2013 for PCV drivers and September 2014 for LGV drivers).

It is an offence to drive without a DQC or to fail to produce a card on request. An operator could be prosecuted for causing or permitting someone to drive without a DQC.

The driver is responsible for reporting lost or stolen cards to the DVLA. They may continue to drive without the card for up to 15 days or until a replacement is received.