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Institute of Transport Administration

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Westoning, Beds MK45 5JD

t: 44 (0)1525 634940
m: 44 (0)7768 303588
e: director@iota.org.uk

 
 
 
 
 
 

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DON’T GET CAUGHT OUT BY CHANGE OF ENTITY RULES

29 Jan 2020

Have you changed the status of your business?

 

Traffic Commissioners' Annual Report                  

The need to apply for a new licence when a change of entity occurs is an issue that traffic commissioners have seen trip up even otherwise compliant operators.

Attempting to transfer a licence from one entity to another can get an operator into a lot of trouble. It would mean that the operator was effectively operating illegally by default, because it would not hold a valid licence.

 

WHY DOES THIS HAPPEN?

One reason this happens is when operators fail to seek specific professional advice from a transport solicitor or consultant, and instead rely solely on advice from an accountant (or another financial advisor).

It is common for accountants to advise on purely business grounds to change entity. This often includes advice to a sole trader to form a limited company. While this advice is given with the best intentions, it overlooks the fact that the operator’s licence is non-transferable.

Operators are expected to have sufficient knowledge of the operator licensing system. Relying on the advice of others in ignorance is no excuse and will not prevent regulatory action.

If in any doubt, seek professional transport advice on any major changes in entity structure. That way you can be absolutely clear what action is required.

 

LIQUIDATION AND INSOLVENCY

You should also be aware that a company, which goes into liquidation, cannot transfer its operator’s licence to a new entity even if it has the same directors.

When an entity with an operator's  licence enters insolvency proceedings, action must always be taken. This can mean surrendering the existing licence.

In certain circumstances, the administrators can apply to the traffic commissioner to continue to run on the operator's licence for a period of time.

In cases where an application is made to continue operating under the existing licence, the traffic commissioner will consider the case within strict criteria, to allow the continuation of the business.

You should always get professional advice as soon as the possibility of insolvency is identified. 

 

CHECK YOUR DISC

Make sure you always check your licensing documentation and the discs in the windows of your vehicles.

The disc carries the name of the entity (sole trader, partnership or Ltd Company) allowed to operate vehicles on the operator's licence and the renewal date  (which is an Operator responsibility).

On the back, printed in bold, is “non-transferable”.  This means exactly what it says – the licence cannot be used by anyone else and a fresh application is required if you wish to do so.

For more information, read the Senior Traffic Commissioner's statutory document on legal entities.

 

https://www.gov.uk/government/publications/traffic-commissioners-legal-entities-november-2018