BusinessCorporate FinanceFleet special: congestion charging

Fleet special: congestion charging

'Forgetful' drivers put firms on the congestion charge penalty spot

fleet decision mercedes

Here’s a quick way to turn £8 into £75 in just over a day. Step 1: drive a
company car into and out of central London. Step 2: don’t pay the congestion

Up to 10,000 company drivers perform this trick every month. Each incident
incurs a minimum fine of £50 that has to be paid in the first instance by the
leasing company that owns the vehicle.

Ultimately, the leasing company recharges the fine to the customer along with
a processing fee of, typically, £25. That brings the total cost of ignoring or
forgetting an £8 charge to £75. Fines rise to £100 if not paid within 14 days
and £150 after 28 days.

When employers’ internal costs for allocating charges and recovering fines
from drivers are added into the equation, the total bill for sorting out
congestion charge penalties against leased vehicles probably comes to well over
£10m a year.

In fact, the London congestion scheme is the number one source of penalties
incurred by drivers of leased and rented vehicles.

Car lease companies processed 122,000 C-charge fines in 2005, according to
the British Vehicle Rental and Leasing Association. That figure compares with
100,000 speeding notices and 87,000 parking tickets in the same year.

At present, the law only allows congestion scheme penalties to be transferred
from the leasing company to the customer where leases are shorter than six
months. The BVRLA is in talks with the congestion charge organisers to change
this but, for now, the leasing companies have no option but to pay up and pass
on their processing costs.

The BVRLA expects penalties to increase significantly as a result of
February’s westward extension of the London congestion scheme, which increased
its area to a 38-square-kilometre zone ringed by more than 600 cameras.

According to Transport for London, those cameras snap around 95,000
chargeable vehicles a day during charging hours.

Of those, about 15,000 are registered with TfL’s fleet scheme, which is
designed to spare businesses from paperwork – and expensive penalties.

Businesses can join the scheme if they own or lease 10 or more vehicles. The
daily congestion charge for fleet users is £7 instead of £8 and, more
importantly, there are no penalty fines because TfL takes payments automatically
via direct debit whenever a registered vehicle incurs a daily charge.

TfL have taken steps in the last two years to make the fleet scheme more
accessible; lowering the original threshold of 25 vehicles and improving the
online account management facility. Nevertheless, a lot of firms are put off by
the annual charge of £10 per vehicle and the amount of administration needed to
set up and maintain an account.

The enlarged C-charge zone might persuade more business vehicle operators to
consider joining the fleet scheme.

The zone stops only a street or two short of the Earls Court and Olympia
exhibition centres, for instance, and many occasional trade visitors are likely
to cross the line into it while negotiating the surrounding one-way systems.

TfL says in its latest annual report on the congestion charge that a large
number of charge-payers (the majority of whom are business drivers) enter the
zone only once or twice a year. Recognising that unfamiliarity and confusion may
lie behind some of the 5,500 daily cases of non-payment, TFL recently sent out
millions of congestion charge leaflets with tax disc reminders.

Most company car drivers never see their car’s V5 or VED documents, of
course, and firms need to offer drivers of leased vehicles guidance about paying
the charge and who will be responsible for the penalty if they don’t.

Paying online at TfL’s website is the most popular solution for
drivers who are not in either the fleet or residents’ schemes, with 30% of all
charges now paid on the internet. The BVRLA urges firms to save themselves the
cost of penalties by encouraging drivers to pre-pay the charge online the day
before driving into London.

Other payment options include voice calls and SMS messages from telephones,
and pay points in shops, car parks and petrol stations.

Last June, TfL changed the congestion charge rules to give drivers an extra
day to pay. Originally, anyone who forgot to pay up before midnight
automatically incurred a £40 (now £50) penalty charge.

The current rules give drivers until midnight on the day following their
entry to the zone to pay – although it costs an extra £2 to use the next-day

Slicker operations, smarter payment systems and the larger charging zone mean
that the scheme is expected to make an extra £40m profit in 2007 (it made £121m
last year). Most of these returns will be invested into the capital’s
loss-making bus network.

Next year, TfL wants to bring in a three tier charging system based on CO2
emissions. A handful of very clean cars will pay nothing; the vast majority will
pay £8 as now, but VED Band G vehicles (including many MPVs as well as 4x4s and
large sports cars) will have to pay £25 a day.

Meanwhile, TFL is experimenting with a vehicle tracking system that uses
roadside beacons to pick up signals from ‘smart tags’ on vehicles. Mayor Ken
Livingstone has said that a road pricing scheme using similar technology could
cover much of Greater London by 2012.

No one expects the new system to be fully driver proof, so finance
departments can look forward to the excuses evolving along with the technology.

Today’s ‘I forgot to pay’ is likely to become tomorrow’s ‘I must have left my
smart tag in my other car.’

Stay up to date

Visit TFL’s congestion charge web site at for full details
of the zone; through routes; charging times; payment methods and the fleet

Never forget

Remind drivers that they can pay the next day if they forget to pay the charge
while they are in the zone. Better still; encourage them to pay online before
setting out.

Register your fleet

Now that the lower limit for fleets is 10 vehicles, it’s less hassle to
register. It costs £10 per vehicle per year but for that you get:

? £7 daily charge per vehicle
? Online account management
? Telephone helpline
? No Penalty Charge Notices (PCNs)
? Option to add ad hoc vehicles
? Direct debit payment

Richard Schooling is commercial director of Alphabet
(GB) Limited

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