In a change to the current taxation scheme the Government is targeting Employee Car Ownership (ECO) schemes with new tax legislation. What exactly are these schemes, and what risks do the changes pose? For years, Employee Car Ownership (ECO) schemes have been a popular and tax-efficient alternative to the traditional company car. These schemes have also had the added industry benefit of creating a significant channel for new vehicle sales. These schemes, however, are now firmly in the Treasury’s crosshairs. Under new draft legislation, the Government intends to apply company car tax rules to vehicles acquired through ECO schemes, citing a desire to “level the playing field” with other benefit-in-kind arrangements. The financial consequences for the estimated 75,000 employees currently in these schemes will be stark. According to one example analysis, the annual tax bill a typical employee could skyrocket from just £325 to £3,500. This dramatic increase in personal tax liability is expected to extinguish the appeal of such schemes, effectively making new cars unaffordable for many participants, particularly younger employees. Industry leaders are warning that this will trigger a cascade of negative consequences. The immediate fear is that the change will significantly dent demand for new cars, pushing would-be buyers towards the used car market instead. This, in turn, could have a serious knock-on effect across the wider automotive sector. For a motor industry already navigating numerous headwinds, this move is seen as another profound challenge to its stability and a direct threat to new car registrations. As always, this advice is general in nature and will need to be tailored to any one situation. As an RMI member you have access to the RMI Legal advice line, as well as several industry experts for your assistance. Should you find yourself in the situation above, contact us at any stage for advice and assistance as appropriate. Motor Industry Legal Services Motor Industry Legal Services (MILS Legal Ltd) provides fully comprehensive legal advice and representation to UK motor retailers for one annual fee. It is the only law firm in the UK which specialises in motor law and motor trade law. MILS currently advises over 1,000 individual businesses within the sector as well as the Retail Motor Industry Federation (RMI) and its members.