Employment Car Ownership Scheme (ECOS)

The Employment Car Ownership Scheme (ECOS) allows you to retain control of your fleet policy although the employee ‘owns’ the car. Your employees benefit from vehicle and maintenance repayments funded through a combination of tax savings, tax-free business mileage reimbursement and top-up cash allowances. If the employee leaves your company, the value of the car must be reimbursed to you.

The scheme is very flexible in that it allows the client to decide at the outset how much it wants the employee to contribute towards the overall cost of the car.  This can be done in a variety of ways to suit the business and employee need in the best way. 

Funding the employee for the vehicle generally comes through the following method:

• The employee contribution (set by the client)
• Utilisation of the tax free mileage allowance (40p/mile to 10,000 miles, then 25p per mile)
• Taxable Top-Up Allowance if the two previous amounts are not sufficient to cover the cost.

This is not something the client will have to calculate, it can be done on your behalf by your ECOS consultant.
 

Benefits to client

• Can offer savings to the business per annum per vehicle.
• Can be a good employee incentive and retention tool.
• Addresses Corporate Manslaughter issues (see below).

Benefits to employee

• Protection from future taxation of cars and fuel increases.
• Allows private fuel to be provided without crippling taxation which negates the benefit.
• Greater flexibility and choice of vehicle.
• Potential to profit at the end of the contract.
• Replicates the peace of mind of the company car.

Corporate Manslaughter

When an employer gives a taxable car allowance as part of the remuneration package this is generally to allow the employee to purchase their own vehicle to be used for both business and private use.  If the company is not involved in the maintenance and upkeep of the vehicle and it is involved in a fatal accident whilst on business use, then the company would be liable for corporate manslaughter under recent legislation.

The Corporate Manslaughter and Corporate Homicide Act 2007 is a landmark in law. For the first time, companies and organizations can be found guilty of corporate manslaughter as a result of serious management failures resulting in a gross breach of a duty of care.

The Act, which came into force on 6 April 2008, clarifies the criminal liabilities of companies including large organizations where serious failures in the management of health and safety result in a fatality.

ECOS assists with this issue by ensuring fully maintained, roadworthy vehicles that have the correct insurance.

Greater flexibility and choice

A benchmark car can be allocated for each grade based on the individual employee’s annual mileage, with the client retaining overall control over what car the employee can have. The company funding is fixed, so if the employee decides to go for a cheaper car then the difference will be added to his take home pay and is not taxable.  Equally if the employee opts for a more expensive car than the benchmark the employee meets the additional monthly cost.

The individual can select any car that they can afford and is allowed under the scheme and is not restricted by what this would mean in terms of taxation on them.

Potential for employee to profit at end of contract

The Credit Sale Agreement includes an optional final payment, which is an estimate of the market value at the end of the contract.  This amount is set out at the start of the contract and does not change.

The employee can decide at the end of the contract if they want to make this payment and retain the car or send it back to the provider.  It might be that the car is worth more than the final payment price and if that is the case the employee can purchase the vehicle and sell it on, retaining any profit tax free.  It could also be purchased to keep as a second car but at the end of the lease, whichever option is taken, that vehicle is no longer part of the scheme. 

Is ECOS right for my company?

ECOS can be suitable for all businesses however may not in all circumstances deliver savings.  Before entering into any arrangement the feasibility of this has to be considered on an individual company basis.  It may also be the case that ECOS is implemented to benefit the employee rather than the business.  Whatever the circumstances, they have to be considered.

On consultation, all the requirements of your business will be considered, and if ECOS is not the answer, there will be some way we can assist you to achieve your goals.