The draft finance bill 2025/26, published on 21 July 2025, contained measures to remove the tax benefits associated with Employee Car Ownership Schemes (ECOS) from 6 October 2026.
These ECOS arrangements were designed to avoid benefit-in-kind charges by transferring ownership of the vehicle to the employee on day one of the scheme, with payment being made through some form of credit arrangement, often via a third party, explains Caroline Harwood
Partner (National Head of Employment Tax at BDO).
The schemes were particularly attractive in the automotive sector, where trade discounts on vehicles could mean significant savings, she said.
“HMRC has felt uncomfortable with ECOS schemes for some time, and the new provisions seek to bring the arrangements into the taxable benefit in kind net,” said Harwood.
“This will be done by deeming provisions which will include cars and vans made available to the employee or a family member if the transfer is made under ‘qualifying’ arrangements.
“These include where there are restrictions on private use, provisions for someone other than the employee to be the registered keeper, where set transfer provisions are used or other proscribed arrangements.”
Employers offering ECOS schemes should assess whether they will fall into the new provisions, Harwood said. If so, they will need to evaluate the impact and quickly communicate it to their employees, she said.
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