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HMRC internal manual

Employment Income Manual

Employee Car Ownership Schemes (ECOS): reviewing a scheme

Introductory remarks, common to this section of the guidance

Unlike car benefit (EIM23000) and car fuel benefit (EIM25500), no single body of legislation deals with ECOS. Instead, the relevant law when considering ECOS is drawn from various parts of the employment income and NICs legislation.

This guidance does not attempt to cover all relevant parts of the legislation in detail. Instead, it seeks to draw the essential aspects together in order to identify where tax and/or NICs can be payable under the normal benefits and expenses rules as they apply to ECOS.

The same principles apply to ECOS vehicles as to any privately-owned vehicles used for business travel.

Unlike the remainder of this manual, EIM31500 to EIM31599 cover both tax and NICs.

Scheme documentation

The meaning of the term ECOS is covered at EIM31501. In order to review a scheme, you will need to see all the documentation. This may include any of the following:

  • document or brochure outlining the scheme
  • scheme rules
  • agreements between employee and employer
  • agreements between employee and finance provider
  • agreements between employee and car provider
  • correspondence and agreements between the employer and any third parties involved, such as the finance provider and/or the car provider
  • instructions to managers about the operation of the scheme.

Any of these may exist in more than one form; make sure you see all variations.

This list is not intended to be exhaustive; other documentation may also be relevant to understanding any given scheme. Ask for all relevant documentation. It is likely to be complex and is often voluminous. Do not be put off; advice is available to help you with this.

Status of advice

As the transactions in the scheme depend on the agreements actually entered into by the various parties involved, you will be unable to form any definitive view of the tax or NICs consequences of a particular scheme until it has actually been introduced.

Even then, your view will be based only on the documents you have seen, so an employer or scheme provider making any changes either to those documents or to the way the scheme operates will no longer be able to rely on any agreements you have reached about earlier versions of the scheme. You should make this clear whenever you comment on schemes.

Advice on similar schemes

You should make it clear that any view you express on a particular set of documents only applies to that employer and does not apply to any other employer’s use of the same or similar arrangements.

For the same reason, you should not rely on statements that someone else has seen and approved a scheme claimed to be identical to the one on which you are being asked to advise. Changes may have been made to the way the scheme operates.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)