In simple terms, ECOS are an efficient method of delivering a vehicle – usually petrol, diesel or self-charging hybrids – to an employee with the benefits of company car, but without the usual associated tax.
In this guide you’ll learn about how ECOS works, the tax efficiencies of ECOS, how ECOS vs company car looks and frequently asked questions.
If you’re a UK-based business looking to provide your employees with an ECOS, click here to see how we can help.
How Does an Employee Car Ownership Scheme Work?
The structure of ECOS transfers the ownership of the car to your employees by selling the vehicle to them using a Credit Sale Agreement (CSA). The car is then no longer classed as a company car, so Benefit-in-Kind (BiK) tax isn’t payable by your employees, and you don’t owe Class 1A National Insurance Contributions (NICs) on the benefit either. You collect the CSA repayment or desired contribution from your employees via payroll and then pay a collective invoice from us for your car fleet.
Our team of experts are ready to learn about you and your business. We’ll look at your existing car benefit arrangements, listen and understand your employee car benefit objectives, before designing an optimised fleet solution for your business.
Discover our approach to providing your business with an ECOS.
How your employees participate in an ECOS?
1. Employees choose an employee car ownership scheme car from a choice list controlled by you. Selection, ordering and delivery all managed on the CBS Portal.
2. The employee car ownership scheme car is sold to your employee. They’re no longer subject to company car tax.
3. Your employees make a monthly to contribute towards the running costs of the employee car ownership scheme car. Their contribution is made via net pay and has no impact on their credit score.*
4. The renewal process is easy and straightforward. At the end of term, employees can choose a brand-new car.
Keep your employees happy by giving them an affordable way to drive a brand-new car with the operational benefits of a company car. You can also choose to remove the hassle of sourcing insurance or organising a maintenance package by including it as part of the scheme.
Tax Efficiencies of an Employee Car Ownership Scheme
With ECOS, the ownership of the vehicle passes to your employee when the car is delivered. This means that BiK tax for your employees and Class 1A NICs for you, aren’t applicable.
You determine the level of employee benefit, meaning you can determine how much an employee contributes depending on their seniority. Employee pays a fixed amount each month, deducted from net pay, to cover the running costs of the car.
Traditional Fuel Cars Employee Car Ownership Scheme
With the removal of BiK tax for your employees and Class 1A NICs for you, petrol, diesel or self-charging hybrids are the most cost-efficient vehicles for employee car ownership schemes. You can choose how much your employees pay towards the life costs of the vehicle.
With employee car ownership schemes, you’re providing an affordable and accessible way for your employees to drive a brand-new petrol, diesel or self-charging hybrid.
Employee Car Ownership Scheme vs Company Car
Business leasing car or company cars are taxable from HMRC’s point of view whereas employee car ownership schemes cars aren’t, the reason being for ECOS, the ownership of the vehicle transfers to your employee at the point of delivery.
For a traditional company car, your employees pay the appropriate BiK tax dependent on the car emissions and P11D value of the car. While for ECOS, there’s no BiK tax to pay, however, employees will pay an ECOS benefit contribution. As an employer, you pay Class 1A NICs on a company car but not on an ECOS car.
In both cases, maintenance is generally included, and we can facilitate that, however, it’s up to you as the employer to decide what level of benefit you want to provide.
Employee Car Ownership Scheme FAQs
Still got a question about ECOS? See if the answer is below in our frequently asked questions.
What cars can employees get with an ECOS?
ECOS choice lists generally include cars that are petrol, diesel or self-charging hybrids, but you get to choose the cars you make available.
Do we need to tell HMRC about an ECOS car?
Your employees only need to notify HMRC if they change from a company car to an employee car ownership schemes vehicle, this is so their tax code can be updated accordingly. You would also need to update your P46(Car) reporting when your employee comes out of their company car.
Who owns the ECOS car?
Your employee named on the Credit Sale Agreement, is the legal owner of the vehicle from the date it’s delivered to them.
Does ECOS show on payslips?
Yes, your employees see the ECOS contribution as a deduction from net pay on their payslip.
Is Benefit-in-Kind tax due on an ECOS car?
An ECOS car isn’t classed as a company car, so Benefit-in-Kind tax isn’t payable by your employees, and you don’t owe Class 1A National Insurance Contributions on the benefit either.
Are Employee Car Ownership Schemes worth it?
If you’re in the market for a traditional fuel fleet while you consider your journey to electric and are considering leasing options, an ECOS could be a more cost-effective solution. If you want to generate business savings, have the freedom to choose which cars can be added to your fleet, and gain full control by choosing how much your employees contribute towards the running costs of their car – ECOS can offer it all.
Can employees claim mileage on an ECOS car?
As they’ll own the car, employees in ECOS cars are eligible to receive Approved Mileage Allowance Payments (AMAP) for business miles that they travel.
Bring an Employee Car Ownership Scheme to your Business
ECOS removes your fleet from the scope of company car tax, helping to create business and employee savings.
Do you want to…
1. Generate savings on your current fleet?
2. Continue driving the cars that work for your business and employees?
3. Remove the P11D admin burden of your current solution?
If the answer is yes, get in touch today.
