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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Employee Car Ownership Schemes (ECOS): benefits in kind - payments for employee’s benefit or loan of asset

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.

Benefits in kind - payments for employee’s benefit or loan of asset

Benefits in kind can be provided in one of two ways

  • by the employer paying for something provided to the employee where the employer is legally responsible for making the payment (e.g. insurance under a fleet policy; see EIM31530 if the employee is legally responsible for payment)
  • by the employee being loaned an asset (e.g. a trailer but not, in this context, a vehicle).

Amount of benefit chargeable

Benefits are not MAPs because they are not “payments to the employee”, as the law requires (EIM31210). Therefore they cannot be exempt from tax as AMAPs.

Note that the full amount of the benefit is chargeable, not merely the private proportion, because business mileage expenses are only relieved via Mileage Allowance Relief, see EIM31330. Deduction under the normal travel rules is prohibited by section 359 ITEPA.

This point is often not understood. A typical example is fuel provided for an employee’s own car as a benefit in kind. The entire cost of provision is chargeable as a benefit, not merely the cost of the fuel provided for private use.

The above is subject to the normal reduction for amounts made good by the employee to the provider of the benefit, see EIM21120 to 21122.

Tax treatment

Benefits in kind are reported on form P11D unless made good in full by the employee before the P11D is due to be submitted.

Subject to the full amount of the benefit being chargeable, benefits in kind are explained at EIM20000 onwards.

NICs treatment

Benefits in kind are subject to Class 1A NICs and are reported on form P11D(b) unless made good in full by the employee before the P11D(b) is submitted. They are explained at NIM13000CO onwards. Class 1A NICs are due on the amount chargeable to tax. No deduction is allowed for business mileage expenses.

Other kinds of transaction in favour of the employee

These are listed with links to the relevant guidance at EIM31520.