Ending ECOS could impact dealership sales and employment
Vehicles supplied through the Employee Car Ownership Scheme (ECOS) will be liable for company car tax, under new legislation.
The changes are expected to be announced in the Autumn Budget and come into effect on 6 October.
HMRC said: “Private use of a company car is a valuable benefit, and it is right the appropriate tax is paid on it. This measure will ensure fairness with other taxpayers, reduce distortions in the tax system, and it reinforces the emissions-based company car tax regime which incentivises the take-up of zero emission vehicles.”
However, the automotive industry has warned this could have a negative impact on new car sales while also disrupting the used car market.
Statistics suggest that ending of ECOS will negatively impact staff recruitment and retention for almost half (45%) of dealerships. Additionally, around 150,000 vehicles enter the ‘nearly new’ market annually through ECOS, many of them EVs.
Negative impact
Sue Robinson, chief executive of the National Franchised Dealers Association, said: “From speaking with our members and gathering evidence over the last few weeks, NFDA believes this will damage the attractiveness of employment in the industry and reduce the number of new cars being registered, ultimately slowing the transition to electric cars.
“Removing ECOS to benefit-in-kind taxation would restrict large and small dealer groups in their ability to retain and recruit staff and impede progress towards decarbonising road transport.”
She added: “NFDA has submitted our serious concerns to HMRC about the ECOS changes to the Finance Bill 2025-26 technical consultation, and we are urging the government to re-think its proposal and support the motor industry and its workforce at this critical time by maintaining ECOS as a valued and effective employee benefit.”
Lost revenue
Meanwhile, Vertu Motors chief executive Robert Forrester has also questioned the policy and suggested that it won’t actually yield the tax returns anticipated.
He said: “The assumption that this change will have no significant macroeconomic impact is, in our view, incorrect. The proposal risks reducing vehicle volumes, disrupting pay structures, and damaging both the new and used car markets.
“Our main conclusion is that the change is likely to reduce income to the Exchequer rather than increase it.”
