Road user levy

The idea of charging foreign lorries to use UK roads has been raised, debated, shot down, and brought back up again for well over a decade. But it is, as of 1 April 2014, now an enacted law thanks to the passing of the HGV Road User Levy Act [back on the 28 February 2013].

A brief history of road charging in the UK

In 2001, then-Chancellor Gordon Brown announced a study to modernise road haulage tax (a few months after the fuel protests of 2000). The Lorry Road User Charging project subsequently got under way under the leadership of HM Treasury minister John Healey and in a climate of secrecy. The idea was to charge all trucks on all roads. The industry trade associations were guardedly supportive, wanting a substantial duty rebate for HGVs. Healey famously said that, at point of introduction, any scheme would be tax neutral. The Treasury spent almost £40m on consultancy fees and at one point there was a project team of 120 civil servants and consultants working on it. They even recruited someone to be chief executive of an organisation to run the charging scheme. A few months later then-Department for Transport (DfT) secretary of state Alastair Darling announced the shelving of the project as a footnote to another announcement. That was July 2005.

The issue then largely died. There was a further, fairly low-key study under Labour about three years later on the more modest Eurovignette but nothing came of that.

In 2010, the coalition government said it was committed to introducing a road charging scheme during its term in parliament. In 2011 the then roads minister Mike Penning pledged that the scheme would not penalise UK hauliers and would be as cost-neutral as possible.

In January 2012 Penning launched a DfT consultation on the government’s proposals for a scheme. This closed in April. In October the DfT response to the consultation was published, along with the government’s draft HGV Road User Levy Bill. The first reading of the bill took place in the House of Commons on 23 October, presented by parliamentary under secretary of state for transport, Stephen Hammond.

So what type of charge is it?

The government’s HGV Road User Levy is a time-based charge and will vary according to 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 or £10 a day is the maximum charge permissible under European law]. This seeks to ensure that the charging scale is linked to the amount of wear a truck causes to a road.

The government did consider a distance-based charge, which many believe would go further in addressing the unfair advantage foreign hauliers have over UK hauliers. However, it was not deemed possible to introduce measures to fully offset the costs of a distance-based charge for UK hauliers without introducing a fuel duty rebate, and the European Court of Justice has already ruled that such a scheme would be illegal.

Which vehicles will it apply to?

The charge applies to all vehicles weighing 12 tonnes or more on a public road in the UK. However, certain rigid vehicles that currently pay VED at the basic rate are exempt, and the secretary of state has the power to exempt certain categories of LGVs in the future.

The legislation includes scope for roads or areas to be excluded from the charge, such as roads crossing back and forth across the boundary between Northern Ireland and the Republic of Ireland.

How much will it cost?

Charges vary according to vehicle type, weight and number of axles, up to a maximum of £1,000 a year. For UK vehicles, the charge bands (A-G) will be the same as the current VED bands (see the band rates tables). So if a vehicle is currently paying VED in band C, it will also pay the levy for band C.

To make the scheme as cost neutral as possible for UK hauliers, the government will reduce VED accordingly, and grants for vehicles with reduced pollution certificates will be introduced.

However, the DfT estimates that for 90% of HGVs the combined cost of the levy and new VED rate will be unchanged on the vehicle tax they pay - the remainder should not see much of an increase with the DfT estimating most will pay no more than an extra £50 a year. For around 35% of rigid vehicles towing a trailer that do not have ‘road-friendly’ suspension, the total amount payable in VED and the levy will increase by more than £50 a year. This applies to fewer than 700 vehicles and is partly due to some of them paying VED that is below the minimum rates set in EU law. Around 40 of these types of vehicle will be hit with an extra cost of £300 a year, but the DfT suggests hauliers could consider replating to a different weight, or no longer using a trailer with that particular vehicle.

Current estimates put revenue from the levy at £20m a year, although this is not ring-fenced and the government will be free to dip into this fund as it sees fit.

Will foreign hauliers be charged the same as UK hauliers?

Foreign-registered operators can choose to pay the charge daily, weekly, monthly or annually. The maximum daily charge is set at £10 in line with EU legislation. It is anticipated that most foreign hauliers will opt to pay the charge daily, weekly or monthly, and a higher rate for these periods has been set than the equivalent rate for a UK operator. This is due in part to the administrative costs of establishing and maintaining a system of payment, collection and enforcement of the levy for vehicles registered outside the UK.

For example, if a UK haulier pays £1,000 annually, this is a monthly equivalent of £83.33, while a foreign operator will pay £100 a month under the legislation. A public web based database (gov.uk/hgv-levy) is avilable to check the levy status of an HGV by entering its registration number. The payment database will enable authorites to identify and take action if the levy has not been paid.

When will it commence?

It's live now (1 April 2014).

How will the levy be paid?

Operators of UK registered HGVs will be required to pay the Levy at the vehicle’s next licence renewal after 1 April.  So an HGV that was relicensed for 12 months in January 2014, will continue with its current tax disc until January 2015.  The Levy will be paid at the same time as VED and in one transaction, thereby avoiding any additional administration costs.  As with VED, the levy can be paid annually or six monthly.  DVLA will calculate the combined vehicle and levy payment and this will be shown on the vehicle licence renewal form (from April 2014 renewals onwards). The tax disc will display the total duty paid (combined vehicle tax and Levy including any relevant Reduced Pollution Grant).  The HGV levy only applies to vehicles on the HGV tax class (01, 02, 45 & 46), combined transport tax class (23 & 53), and special types tax class (57 & 58).

Vehicle Excise Duty paid for HGVs subject to the Levy will be reduced from 1 April 2014, to offset the Levy’s cost.  As a result, for over 90 per cent of HGVs the combined cost of the Levy and new VED rate will be unchanged on the vehicle tax they currently pay.

Vehicles registered abroad must make levy payments before entering the UK. The levy can be paid by day, week, month or year. Online payment of the levy for operators completing journeys on UK roads is available and offers a pay-and-go purchasing option. Pay-and-go purchasing can be completed by telephone and at some point-of-sale terminals on ferries and truckstops. The foreign operator payment system is operated by Northgate Public Services.

Who is responsible for paying the levy?

For UK hauliers, liability lies with both the registered owner of the vehicle and the registered keeper. It applies the same principle that is used for paying VED, so whoever is currently liable for the payment of VED will, in future, also be liable for the payment of the levy. For foreign trucks, the person who holds the community licence for the vehicle and the person who keeps the vehicle are both liable to pay the levy.

Enforcement of the levy

Under the legislation, it will be an offence not to pay the charge. It will be also an offence to drive a truck if the levy has not been paid, therefore the driver of the vehicle will be the initial offender. However, the person liable for paying the levy will have also committed an offence. The DVLA will be able to enforce against UK vehicles that have not paid using their own records. The DVA will be responsible for administering this in Northern Ireland. If the appropriate levy has not been paid, the vehicle licence will be refused.

DVSA and the police will have the powers to enforce the charge at the roadside with fines. For drivers that are unable to provide a UK address, on-the-spot fines of £300 will be issued [in the form of a court deposit), with the vehicle immobilised until this is paid. The use of automatic number plate recognition technology will assist DVSA’s enforcement of the levy, with checks likely to take place at or near ports[ there is no physical sign of payment such as a paper disc, sticker or similar item). Fixed penalty notices will also be issued, and if it goes as far as court, as maximum fine of £5,000 will be imposed.

Stolen, sold or disposed of vehicles?

If a vehicle is stolen, the registered keeper is exempt from paying the levy after the day of the theft. If the vehicle is recovered, the liability of the keeper recommences. A keeper is also no longer liable to pay the levy from the date of sale or disposal. If already paid, a rebate can be applied for.

For more you can email hgvcharging@dft.gsi.gov.uk or visit gov.uk/government/collections/hgv-road-user-levy. There is also a Twitter feed: @hgvlevy

Levy band rates

(T) stands for rigid vehicle towing a trailer i.e. a drawbar combination

Rigid goods vehicle

Rigid goods vehicle with trailer over 4,000kg

Tractor unit with two axles

Tractor unit with three or more axles