Keep up with company transport legislation

Small businesses face a number of challenges during a normal working day, but one of the most difficult is keeping on top of legislation.

Every year, thousands of new pages of rules and regulations hit the statute books, with many of them relevant to small companies.

Company transport is one area where it can be difficult to keep abreast of all the legislation that will affect the business, ranging from legal compliance through to taxation.

However, the inconvenience of ensuring your fleet is meeting its legal requirements is a small price to pay compared to some of the potential costs of getting it wrong.

Depending on the severity of the offence, fines can be thousands of pounds, which could severely impact a small business where a small increase in costs could affect the bottom line.

This overview aims to highlight some of the key issues companies need to consider when they are reviewing their vehicle policy, looking at both the driver and the business.

The business

P11D

Form P11D is the annual return of benefits and expenses provided to directors or employees earning more than £8,500 per year.

P11Ds have to be submitted by July 6. Missing the deadline could lead to a penalty of up £300 per form and a further charge of £60 a day for each day the form is late.

HM Revenue & Customs could impose a maximum penalty of £3,000 per form for an incorrect return, although historically it has not done so.

Under-reporting on fuel, incorrect dates of vehicle use, and omitting pool cars and vans are common errors.

Class 1A NICs

This can often be a hidden fleet cost, but it significantly adds to the expenses of providing company cars and ‘free fuel’.

Class 1A National Insurance Contributions (NICs) are worked out in one calculation, using the total cash equivalent figure of all benefits liable for Class 1A NICs.

The rules for working out the cash equivalent of a benefit are the same for both tax and Class 1A NICs.

This means that you can use the figures you report on an employee’s P11D – Return of Expenses and Benefits, to work out the amount of Class 1A NICs due.

Once you have worked out the cash equivalent of each benefit you provide, including the cash equivalent of car and fuel benefits, you add together each cash equivalent figure recorded on individual P11D forms to get a single figure, and then multiply that figure by the Class 1A NICs percentage rate, currently 12.8%.

That is the tax your business pays.

Management of Health and Safety at Work Regulations 1992 (updated 1999)

This set of regulations hammers home that companies have a responsibility to carry out assessments of risk to the health and safety of employees while they are at work and to the people who may be affected by their work activities.

Driving on company business is affected by this regulation.

Health and Safety at Work Act

This act requires the employer to ensure, as far as reasonably practicable, the health and safety of employees (full or part-time) while at work.

This includes work-related journeys and covers all drivers whether they are in company vehicles, using their own vehicles for business use, temporary drivers or freelance, agency or contract workers.

Provision and Use of Work Equipment Regulations 1998

These regulations ensure that work equipment is suitable for its intended use, safe, inspected and properly maintained.

It also requires those using the equipment to be properly trained.

Management of Health and Safety at Work Regulations

Employers are required to carry out risk assessments, make arrangements to implement necessary measures, appoint competent people and arrange for appropriate information and training.

Workplace (Health, Safety and Welfare) Regulations

These regulations cover a wide range of basic health, safety and welfare issues including traffic routes for vehicles within the workplace.

Corporate Manslaughter Act

The difficulty with current laws that need to find a ‘directing mind’ of a company personally guilty of gross negligence is tackled by this act.

The new act will look at failings within the senior management of an organisation, so a company can be prosecuted, rather than an individual.

Health and Safety at Work Act

This identifies that employers have a duty of care for the safety of employees at work regardless of the type or size of the business.

There is also a duty of care to others who may be affected by their business activities, which, in the case of driving, means all other road users.

Health and Safety Offences Act

The latest piece of legislation to hit the statute books, this updates the Health and Safety at Work Act.

The new rules have increased the penalties for breaches of the legislation, raising the maximum fine from £5,000 to £25,000 and broadening the range of offences for which individuals can be jailed.

Road Traffic Acts supported by the Highway Code

Road Traffic Acts and the Highway Code identify responsibilities for the employer as well as the employee.

Smoking legislation

Employers are responsible for enforcing the blanket ban on smoking in public places in the United Kingdom, which also affects thousands of company vehicles.

Company vehicles are affected because the bans target all enclosed public places and workplaces, although Scotland specifically targets vans in its legislation.

To encourage reluctant smokers or companies to comply, fines range from a fixed penalty of £50 for smoking in a smoke-free vehicle to £200 for failing to display proper signage.

Companies face fines of up to £2,500 for ‘failing to prevent smoking’ in a smoke-free building or vehicle.

For more information log on to:

www.clearingtheairscotland.com
www.smokefreeengland.co.uk
www.smokingbanwales.co.uk
www.dhsspsni.gov.uk/index/phealth/smoking_ni_order_2006.htm

Online advice

For a summary of your responsibilities for running a safe and well managed fleet, log on to www.dft.gov.uk/drivingforwork.

The website provides a straightforward legislation guide, advice on how to manage driving for work, case studies and templates for managing drivers.

The driver

Company Car Tax

Employees will pay tax if a company car is made available to them for their private use (this includes commuting) or they are provided with free or subsidised fuel for private use in that car.

The tax they pay is broadly determined by three factors:

list price of the car plus any accessories.
CO2 emissions of the car.
fuel type of the car.

In general, the benefit charge is lower for cleaner and cheaper cars. This is to encourage employees and their employer to choose vehicles which are less damaging to the environment.

The normal charge is between 15% and 35% of the list price of the car, though the reductions for alternative fuels and low emission vehicles can reduce the charge to as little as 9%.

The maximum can never exceed 35%, even for diesels, which currently incur a 3% surcharge because their particulate emissions have an impact on urban air pollution.

There is an interactive calculator at www.hmrc.gov.uk/calcs/cars.htm to help drivers to calculate the charge for a particular car. More detailed information on the rules is available at www.hmrc.gov.uk/helpsheets/ir203.pdf

Fuel for private mileage

They say there is no such thing as a free lunch – and there is also no such thing as free fuel for private mileage.

What drivers actually receive is an expensive benefit which incurs such heavy taxes, for both the individual and the employee, that it is worthless for most employees. Even worse, it could actually be costing them money.

When an employer provides free fuel to an employee, there is a taxable value placed on the benefit – currently £16,900.

The driver pays tax on a percentage of this amount, which is the same percentage tax band as their company car.

So if a driver’s car is in the 18% band for company car tax, then the driver also pays tax on 18% of the free fuel benefit of £16,900 – or £3,042.

In other words, receiving free fuel can be equivalent to the driver’s company car tax bill, effectively doubling their liability.

Visit http://www.hmrc.gov.uk/calcs/cars.htm to see how much free fuel really costs.

Highway Code

Despite all the legislation facing fleet operators, drivers still need to take responsibility for their actions.

There is a wealth of legislation governing how they must behave on the road, but by far the best way to ensure they know their responsibilities is to get them to read the Highway Code.

Road safety minister Jim Fitzpatrick called for all drivers to read the latest Highway Code after it underwent the first major rewrite in eight years recently.

The new code has been substantially rewritten to reflect the different hazards and issues facing modern drivers.

Fitzpatrick said: “The official Highway Code is for life, not just for passing your driving test. It is a crucial tool for all road users. Road safety is a responsibility we all share and everyone should have a copy of the code to keep their knowledge up-to-date.”

In addition to 29 more rules, there have been substantial rewrites of key sections, with the addition of important new advice that is aimed at reducing crashes, but also lowering emissions and congestion.

The word “accident” has been removed in favour of “collisions”, “incidents” or “crashes”.

But the changes are much more substantial than just alterations to the wording of the code.

A new two-paragraph section on distractions covers everything from smoking to tuning a radio, eating and drinking.

It also warns that while hand-held phones are illegal to use while driving, hands-free phones are also a distraction, while satellite navigation and multi-media devices are also highlighted as a concern.

Merging in turn for roadworks and turning off the engine when stationary are also included.

An online version of the Highway Code is available at http://www.direct.gov.uk/en/TravelAndTransport/Highwaycode/index.htm

Road Safety Act

In 2006, the new Road Safety Act launched a number of new laws that affect drivers.
Areas covered by the act ranged from new laws such as causing death by careless or inconsiderate driving and furious driving to a major review of penalty points.

This included the introduction of a three- point penalty for using a hand-held mobile phone while driving.

Proposals that are still being discussed which are linked to the act include a plan to double penalty points for speeding in some areas.

The Department for Transport is considering graduating the fixed points system so motorists who go vastly above the speed limit will face tougher punishments.

Those caught at 45mph or above in a 30mph limit are likely to receive six fixed penalty points and a £100 fine instead of the present three points and £60 fine.

Road Traffic Acts

This provides the basis for much of the legislation that drivers face on the road and identifies the circumstances under which they can be prosecuted.

The reason why the Highway Code is so useful is because it summarises a driver’s responsibility set out in a vast range of legislation.

Here are just a few:

Motor Vehicles (Driving Licences) Regulations 1999.Motor Vehicles (Wearing of Seat Belts) Regulations 1993.
Motor Vehicles (Wearing of Seat Belts) (Amendment) Regulations 2006.Motor Vehicles (Wearing of Seat Belts by Children in Front Seats) Regulations 1993.
Powers of Criminal Courts (Sentencing) Act 2000.
Police Reform Act 2002.
Road Safety Act 2006.
Road Traffic Act 1988.
Road Traffic Act 1991.
Road Traffic (New Drivers) Act 1995.
Road Traffic Offenders Act 1988.
Road Vehicles (Display of Registration Marks) Regulations 2001.
Road Vehicles Lighting Regulations 1989.
Road Vehicles (Registration & Licensing) Regulations 2002.
Traffic Management Act 2004.
Traffic Signs Regulations & General Directions 2002.
Vehicle Excise and Registration Act 1994.