The government is proposing changes to the way employee car ownership scheme (ECOS) arrangements are treated for tax purposes. Under the draft Finance Bill 2025, ECOS will be brought into the scope of the benefit in kind rules that already apply to company cars.
The aim of this change is to close the gap between company car arrangements and ECOS, ensuring both are taxed consistently. At present, some ECOS are seen as an alternative to traditional company car schemes, which can create differences in treatment. By including ECOS in benefit in kind rules, the government intends to provide greater clarity and fairness across the system.
Concerns raised and next steps
Professional bodies, including ICAEW, have raised concerns that the legislation could have unintended consequences. ICAEW has highlighted that genuine commercial arrangements, such as household members purchasing vehicles through manufacturers’ schemes, could inadvertently fall into scope. This would result in additional charges for employees that were not the intended target of the changes.
Preparing for change
ICAEW has recommended that the government introduces transitional provisions to help employers and employees adjust. This would give time for existing schemes to be withdrawn and allow businesses to update remuneration policies or contracts. Employers may also wish to review how salary sacrifice arrangements interact with these changes. At Gravita, we can assist with the practicalities of implementing salary sacrifice via payroll to support organisations in managing employee benefits effectively.
The changes form part of a wider effort to align the tax treatment of workplace benefits. With the Budget set for 26th November 2025, employers and employees will be watching closely to see how the government responds to industry feedback.
