Community Transport, Section 19 Permits and Contracts

In general terms, any element of reward in the operation of a minibus brings the operation within PSV licensing. However, non-commercial operators can obtain Permits under Section 19 Transport Act 1985, exempting them from most of the implications of such licensing.

Unfortunately, some of VOSA’s local enforcement staff believe that “projects which involve tendering procedures for commercial work should not be using Section 19 Permits”, and despite no prosecution succeeding, continue to advise operators and authorities along these lines.

Their view is that contract work, particularly if won competitively, must be undertaken for profit. They also suggest (beyond their remit) that local authorities have a duty to ensure a “level playing field” and should not accept tenders from S19 operators, as this constitutes “an unfair advantage”.

The key is the Transport Act 1985. Section 18 states that PSV operator and driver licensing do not apply to s19 vehicle use, provided all the following requirements are met. Set out in Section 19, these are that the bus:

a) is being used by a body to whom a permit has been granted under this section;

b) is not being used for the carriage of members of the general public nor with a view to profit nor incidentally to an activity which is itself carried on with a view to profit;

c) is being used in every respect in accordance with any conditions attached to the permit; and

d) is not being used in contravention of any provision of regulations made under section 21 of this Act.

Let us assume: a valid Section 19 Permit for the operator (the body that controls the driver), no conditions attached to the Permit (such conditions are unusual), no basic breaches in respect of the Permit (e.g. no disc displayed), the vehicle (e.g. not roadworthy) or the qualifications of the driver. No relevant regulations have been made under Section 21 (see d) above), and a school, social work or similar contract does not involve carrying the general public.

Consequently, the key issue is whether the organisation is operating its minibus “with a view to profit or incidentally to an activity which is itself carried on with a view to profit”.

It would be unusual, but not impossible, for such minibus work to be ancillary to some other profit-making activity. Neither the local authority nor an NHS agency are activities undertaken with a view to profit (despite the market economy in the NHS). However, work for private schools, commercially-operated care homes and day centres, and for commercial contractors to local authorities and health agencies would count as incidental to a profit-making activity and are not appropriate for a s19 Permit operation.

In some cases, another charity may be providing the facility to be served by the transport (e.g. Age Concern providing day care services under contract to the council). Whether the work could be undertaken under a s19 Permit would depend upon whether it was the parent charity that is the main provider, or a non-charitable trading subsidiary - s19 Permit operators should not undertake work that benefits such subsidiaries.

Parliament did not define the meaning of the word ‘profit’. In my view, this is not restricted to ‘profit’ in the sense of conventional profit-distributing companies, nor to taxable ‘profit’ in the ‘end of year’ accounting sense. Parliament intended to restrict s19 Permits (a cut-down form of PSV licence) to bona fide organisations making charges that cover their costs and no more. It did this by defining legitimate organisations (bodies concerned with education, religion, recreation, social welfare and other activities of benefit to the community) AND by restricting the use of Permits to activities where the charge levied is no more than the cost of operation.

The question boils down to whether, in pricing the contract, the organisation is attempting or intending to make a surplus. It is the intent (“view to”) that is important here – actual costs may go up and down, so the outcome may be a surplus or a loss. For example, a group might prudently allow for vehicle repair in their costing, but in the event make a surplus as no repairs are required.

A community transport group is not entitled to operate contracts under a s19 Permit, for the local authority or anyone else, in order to make a surplus that is used to cross-subsidise other loss-making parts of the transport operation or indeed any other activities. Any suggestion of cross-subsidy is prima facie evidence of intention to make a surplus, and will stimulate investigation with a view to prosecution of both the organisation and its drivers. To defend any such accusations, a community transport group would need two things:

a) a convincing explanation of why it chose to undertake this particular contract

b) an explanation of its pricing policy, with a worked example relating to the pricing of this particular contract.

VOSA’s misunderstanding may reflect the significant recent emphasis, reinforced by some funders, on community transport operators embracing the contract culture and creating opportunities to improve their sustainability. As to whether it is a good idea to do contract work under a s19 Permit and not make a surplus, and how to organise matters so that you can make a surplus, these will need to be left to another time.

A version of this article first appeared in CTA Journal, the magazine for everyone involved in community and voluntary transport, published by the Community Transport Association. See www.ctauk.org