Fleet News

Warning over ECO schemes

LEADING tax experts are warning that structured employee car ownership (ECO) schemes could become 'too popular', after claims they could slash millions of pounds from company and driver tax bills.

The schemes mean employees technically own their company cars, thereby avoiding company car tax, even though they can offer all the comfort and protection of a traditional company car.

Drivers fund the vehicles through a cash allowance, business mileage reimbursement and savings in benefit-in-kind tax.

ECO suppliers claim the schemes will protect drivers from any increase in company car tax under the new emissions-based company car tax system, while making savings in National Insurance Contributions and personal taxation of up to £1,500 per car.

But tax expert Deloitte & Touche has sounded a note of caution that the Inland Revenue will start to attack ECO schemes if the Treasury begins to identify any significant loss of tax income from company cars.

Alison Chapman, a tax partner with Deloitte & Touche, said: 'Under the new company car tax rules, the Inland Revenue does not expect to collect more tax.

'But if perk drivers do not come back to the company car parc and high mileage drivers are put in to ECO schemes, the revenue stands to collect less tax.

'So, either other drivers will be charged or the Revenue will simply block these schemes. While the Revenue is not trying to collect more tax, it will not be happy to collect less.'

But Alastair Kendrick, director of PAYE/NI solutions at Ernst & Young, said he did not think the Inland Revenue would attack ECO schemes if they became 'too popular'.

Kendrick said: 'As long as companies get them set up properly there should not be a problem.

'However, we are seeing some sharp and aggressive packages being set up which could be the subject of attack.'

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