The National Franchised Dealers Association (NFDA) has written to Chancellor Rachel Reeves ahead of the upcoming Budget, urging the Government to reconsider plans to scrap the Worker Automobile Ownership Scheme (ECOS), warning of damaging consequences for the retail sector and its workforce.
Using ECOS has declined however the scheme is still widely utilized by automotive manufacturers and dealers for their very own employees, who can obtain a brand new automotive at a substantially discounted price.
The cars are then typically bought back by the manufacturer or dealer to secure good quality used automotive stock. For some businesses, providing high-value cars without triggering a automotive profit charge has been a big feature of their worker reward strategy.
Under draft laws published by HMRC in July, all company cars made available under ECOS arrangements on or after 6 October 2026 would grow to be accountable for benefit-in-kind (BiK) taxation. The Treasury estimates the move would generate £275 million in additional tax revenue in its first 12 months.
In September, NFDA said it submitted a proper response to the Government’s consultation, outlining the negative impact of abolishing ECOS.
In its letter to the Chancellor this week, the association again stressed the vital role the scheme plays in helping employees access reasonably priced vehicles and in supporting the transition to electric mobility.
Sue Robinson, chief executive of NFDA, said: “The Government needs to contemplate the implications of scrapping the ECOS scheme as it is going to damage the attractiveness of employment within the industry and reduce the number of recent cars being registered.
“Removing the ECOS scheme can be short-sighted and detrimental to each the workforce and the broader automotive sector. For example, it will slow the electrification process as lots of the cars entering the nearly recent market through ECOS are electric vehicles.
“It could also deter employees who won’t otherwise give you the chance to access a vehicle, and scrapping such an worker profit would inevitably hinder staff retention.”
The Society of Motor Manufacturers and Traders (SMMT) earlier this month said that despite regular demand and powerful electric vehicle uptake, the industry’s long-awaited return to a two-million-unit market is now under threat from the proposed ECOS changes.
Vertu Motors chief executive Robert Forrester has also warned that the idea that this variation may have no significant macroeconomic impact is wrong.
“The proposal risks reducing vehicle volumes, disrupting pay structures, and damaging each the brand new and used automotive markets. Our principal conclusion is that the change is probably going to scale back income to the Exchequer quite than increase it,” he said in a recent interview.
Highlighting Vertu’s own situation, with almost 250 employees on the scheme, Forrester said the business estimates the annual tax take per worker would fall from £32,500 to £4,505 if staff were moved back into traditional company cars, cutting Government income by almost £7 million across the group.
Business advisor BDO, as a part of its 2025 Motor Salary Survey, advised that while consultation between the industry and HM Treasury is ongoing, employers will still need to construct the proposed ECOS changes into their very own planning and consider alternative approaches.
Employers may then have a look at increasing using EVs provided as company cars, which may in lots of cases offr a more tax-efficient final result for workers than an equivalent vehicle offered through ECOS.
Another choice is to retain the ECOS arrangement but review how the upper benefit-in-kind charge can be funded, whether by the worker, the employer or through a shared approach.
An additional possibility could possibly be to adapt the ECOS structure in a way that avoids triggering an organization automotive benefit-in-kind charge altogether, though any such variation will carry wider business, contractual and private implications.
This Article First Appeared At www.am-online.com
