Fleet News

Opinion is divided over ECO schemes

OPINION remains divided in the industry over whether fleets offering Employee Car Ownership Schemes (ECOS) will be affected by changes to tax rules.

A growing number of companies are insisting that ECO schemes will be unaffected by the introduction of disclosure rules in the Tax Avoidance Regulations 2004.

Leasing company Alphabet has added its voice to the debate after Black-i Vehicle Management managing director Nick Brown said ECO schemes potentially fall within the tax disclosure regulations (Fleet NewsNet, August 4).

Alphabet commercial director Richard Schooling said: ‘Thousands of drivers already own cars through ECO schemes that have been checked and endorsed by the Inland Revenue.

‘Comments linking employee car ownership schemes to the tax avoidance crackdown are nothing more than groundless scare-mongering.’

But commenting on ECOs, fleet consultant Colin Tourick said: ‘Here, the employer is very actively involved in introducing a scheme of which the main benefit is tax reduction. In my view, these schemes are definitely going to be caught by the new rules, but as almost all these schemes are already subject to individual approval by the Inland Revenue, this should hold no fear for employers operating them – unless the Government decides to alter the law, of course.’

The rules require disclosure of transactions that are expected to obtain a tax advantage as a main benefit and involve certain employment or financial products. Companies are investigating whether the new rules will affect alternative company car schemes, including employee car ownership schemes, which effectively transfer ownership of a company vehicle to the employee so they do not have to pay company car tax.

It is currently unclear whether such schemes are affected, but the rules apply to arrangements which ‘have as a main benefit the gaining of a tax advantage’. The tax advantage referred to must be in respect of Income Tax, Corporation Tax or Capital Gains Tax.

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