UPROAR AT PLANS TO END CHEAP DEALS FOR CAR INDUSTRY STAFF

Government believes scheme used by car makers and dealers is unfair

- JOHN EVANS

The government's plan to end what it has called “contrived car ownership schemes” has rattled the UK’s automotive industry, which forecasts devastating consequences for itself and its workers if this becomes law.

The Employee Car Ownership Scheme (ECOS), which the government intends to end from 6 April 2026, differs from traditional salary sacrifice schemes in that the car is owned by the employee, not the employer.

Operated mainly by car makers and their dealers, ECOS enables an employee to buy a brand-new car at a hugely discounted price.

Monthly repayment bills are very low, with little or no interest charged.

Under the terms of the arrangement, the employee is required to sell the car back, typically after six months or 6000 miles. It’s then replaced by another.

Because the car is owned by the employee and so not deemed a company asset, the employee is not required to pay benefit-in-kind tax or national insurance contributions.

As such, the government believes this arrangement is neither legitimate nor fair, despite ECOS users being subject to heavy limitations (see right).

In her Autumn Budget, chancellor Rachel Reeves outlined measures to “level the playing field” because “this arrangement means those benefiting don’t pay company car tax which other employees pay”.