Do You Need a Financial Standing Stock Take?
Having sufficient financial standing to run your fleet is a mandatory continuing requirement of holding an Operators Licence. Operating goods vehicles or PSVs without the necessary financial standing places your licence, your business and your good repute at risk.
The levels of financial standing required are reviewed on the 1st working day of October each year, to come into effect from 1st January the following year.
As of 1st January 2018, the levels required are:
- £7,950 for the first vehicle
- £4,400 for each additional vehicle
(The requirement for a restricted licence remains constant at £3,100 & £1,700 respectively)
Are Your Meeting your Financial Standing Requirements?
Can you answer these four key questions?
- How much money can you find if the need arises?
- How quickly can you find it?
- Where will it come from?
- Are you aware that the figure changes from year to year?
The purpose of the financial standing requirement is to ensure that your business has a sufficient level of financial resources available for the proper administration of the business. Insufficient financial standing will mean the loss of your licence and with it your business unless you are granted a period of grace to bring it up to the required levels.
The key word here being ‘available’ – meaning that it is capable of being used.
Don’t forget that the financial standing required is calculated by the maximum number of vehicles an operator is authorised to operate not just the number it currently operates!
How to Evidence Available Financial Standing
An average balance of the last three months bank statements – snapshots and summaries are not suitable.
Will be taken into account when assessing an average bank balance over three months
Available balance on company cards can be used, as can own personal credit cards, but beware of the impression created if you are scraping your available funds together from several different cards.
Evidence will have to be provided to show sufficient average of funds over 3 months and certification of how quickly these funds can be accessed.
Invoice Factoring Agreements
Don’t fall into the trap of thinking that the maximum limit on this facility is evidence of financial standing. The evidence you need to provide from the factoring facility must show the funds available for quick access.
There are other less common forms of evidencing financial standing which are acceptable. If you need to rely on these ensure that you get professional advice as to what you need to provide.
What Should You Do?
Remember the Operator’s licence system is built on trust – so you need to make sure that you continue to meet the requirements. If this is not going to be the case, you must take steps to remedy the situation before you fail to meet them and if you cannot meet your financial standing you must report the fact to the Traffic Commissioner.
If you need a little time to get this sorted, be transparent, apply to the Traffic Commissioner for a period of grace. .
You might consider offering a temporary curtailment of the number of vehicles that you operate if this would bring you back within the required levels, giving you time to sort your finances.
If you are called to Public Inquiry the Traffic Commissioner will ask to see evidence of your financial standing, even if a Public Inquiry is called for another reason.
The rules around financial standing are complex but at Smith Bowyer Clarke our solicitors and barristers are specialists in Road Transport Law and we have extensive experience assisting operators with financial standing queries. Speak to one of our transport lawyers today for a free initial consultation.
Don’t leave this key undertaking to chance – make sure that you meet the requirements now!