Custom Search

Employee Car Ownership Schemes

Employee Car Ownership Schemes (ECOS) are a tax efficient method of delivering a car benefit to employees. They are an alternative to providing a company car and can be structured to provide exactly the same benefit as a company car or varied to suit the objectives of your organisation.

CBS consultants were involved in developing and implementing some the earliest ECOS arrangements and still manage and provide services to ECOS that have been operating for over 10 years. Since 2002 CBS has developed the latest generation of ECOS, increasing the tax efficiency of the arrangement, increasing operational flexibility and reducing administration.

Under an ECOS the cars are sold to employees under the terms of a Credit Sale Agreement on a specified contract term and mileage. The Credit Sale Agreement also includes a full maintenance package. The employee makes monthly repayments due under the Credit Sale Agreement. At the end of the agreement term the employee can either settle out the loan and retain the car or exercise an option to sell and return the car back to CBS. The ECOS can be structured to leave the employee free of all risk or some risk can passed across to the employee by the company.

Savings are created as the company car tax that the employee would have paid is now redirected towards the cost of the car and the employer no longer pays Class 1A NIC on the company car benefit. In addition Approved Mileage Allowance Payments (AMAP), tax and NIC free amounts that can be paid for business mileage, can be utilised to mitigate tax gross up on any benefits that arise under the ECOS.

The benefits that an ECOS can deliver depend on a number factors including:
  • Level of car benefit under existing policy
  • Employee marginal rate of tax profile
  • Total mileage profile
  • Business mileage profile
  • Private fuel provision
Savings that arise from moving to an ECOS can be shared between the employer and the employee, improving the level of benefit provided.

When considering implementing an ECOS it is important to conduct a feasibility study to ensure that the economics work for your organisation, that they take into account sensitivities and that the right policy decisions are made.

CBS consultants have a wealth of experience of implementing ECOS for many types of organisations. CBS do not have a “vanilla” product but design ECOS to meet the particular objectives of your organisation. CBS will assist you in implementing your ECOS and are able to provide the following services.
  • Financial modelling
  • Policy design
  • Tax clearance
  • Compliance of relevant legislation
  • Communications strategy, development and delivery
  • Project Management
CBS can provide a one stop shop for your ECOS, implementing, funding and managing the scheme or alternatively you can pick and choose the components of the ECOS where you would like CBS to support you.