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HMRC internal manual

Employment Income Manual

Employee Car Ownership Schemes (ECOS): tax and NICs consequences of using ECOS arrangements

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.

Tax and NICs consequences

Where the conditions for a car benefit charge (EIM23020) are not met, the special regime for car and car fuel benefit cannot apply. Under those regimes, the only possible charges are for the car, fuel and (exceptionally) a chauffeur; all other charges are subsumed within those.

Because this is not so for an ECOS, the result is that every individual transaction has to be considered for both tax and NICs. Examples are:

  • the price at which the vehicle is sold to the employee, see EIM21640 onwards
  • the amount at which the employee can resell the car to the employer or provider (often referred to as the ‘guaranteed future value’), see EIM21660 onwards
  • provision of any benefits in kind, such as vehicle excise duty, insurance, repairs and servicing , see EIM31535
  • where any payment is made in connection with the vehicle, see EIM31520.

This list is not intended to be exhaustive. Not all of the above will necessarily appear in every scheme, but particular schemes may involve additional tax and/or NICs consequences.

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