Financial Standing Guide For Idiots
How much is required?
The finance required for holders of a Standard Operators Licence is decided by the Secretary of State for Transport, however the levels for a Restricted Licence are set out after consultation with the Traffic Commissioners.
Standard National/International Operators Licence
S13A(2)(b) of The Goods Vehicles (Licensing of Operators) 1995 Act states that the traffic commissioner must be satisfied that the applicant has appropriate financial standing as determined in accordance with paragraph 6A of Schedule 3. Operators must be able to demonstrate that it has at its disposal, at all times, capital and reserves of £8,000 for the first heavy goods vehicle, £4,500 for each additional heavy goods vehicle and £800 for any authorised light goods vehicles. Operators of only lights goods vehicles must show £1,600 for the first vehicle and £800 for each additional.
Restricted Licence
The Senior Traffic Commissioner for Great Britain issues the following Directions to traffic commissioners under section 4C(1) of the Public Passenger Vehicles Act 1981 (as amended) and by reference to section 1(2) of the 1995 Act. The directions dictated the delegated functions in relation to the requirement for financial standing. The Senior Traffic commissioner has taken account of the financial requirements determined by the Secretary of State and directs the Traffic commissioners to adopt the financial levels for a Restricted Operators Licence to be £3,100 for the first heavy good vehicle and £1,700 for each additional heavy goods vehicle.
Assessing the availability of Appropriate Financial Standing
The provisions allow flexibility in how the continuous mandatory requirements might be satisfied. The easiest route to satisfying the Traffic Commissioner that the operator has sufficient financial standing is to submit bank statements in the name of the operator for a 3- month period. The average balance over this period will be calculated and added to any overdraft (or credit facility demonstrated by a formal written commitment by the bank). Financial standing can also be proven in other ways including credit card facilities or factoring arrangements.
This approach, however, only gives a historic analysis of the Operator’s financial position and has been of limited assistance to new applicants who may only be able to establish access to the required finances for a period of 1 month prior to the establishment of the business. Therefore, each case must be considered on its own individual merits.
Where applications are made digitally, the traffic commissioner reserves the right to request originals.
What happens if you fail to meet the requirements?
Operators who fail to meet the financial standing requirements on an ongoing basis risk having their Operator’s licence revoked by the Traffic Commissioner. Financial standing is a continued obligation that continues throughout the lifetime of an Operator’s Licence which is routinely checked every 5 years as part of a renewal of the Operators Licence or if the Operator is called to a Public Inquiry or at a Preliminary Hearing.
What do if you do not meet the requirements.
If you already know you do not meet the required financial standing levels, you are obliged to inform the Traffic Commissioner. We can help you make the relevant notification to the Traffic Commissioner by requesting a period of grace to provide you with a breathing space to get your finances in order. The Traffic Commissioner will only allow a period of grace if there is a realistic chance of the operator bringing their finances within the financial standing that they need. They will not allow a period of grace to allow an operator to try to trade their way back into compliance. For more guidance call our specialised team of lawyers today on 01332 987 420.
