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ECO schemes escape firing squad

Date: 06 December 2006   |   Author: Tristan Young

Gordon Brown

HM Revenue and Customs suspended the death sentence on Employee Car Ownership schemes until at least mid-2007.

The Pre-Budget Report slammed ECO Schemes because they resulted in drivers choosing more polluting cars and avoided tax.

According to the PBR: "HMRC has undertaken extensive discussions with business which have indicated that: there are a number of different ECOS, some of which have been designed to provide an ongoing benefit to employees that is currently not taxed or subject to NICs; and the carbon emissions of an average ECOS car are around 20g/km higher than an average company car.

"Furthermore, there is a noticeable interaction between the tax treatment of ECOS, tax-free mileage allowances and rates of company car tax, which may have contributed to the popularity of ECOS."

The report added: "HMRC will hold further discussions with industry in early 2007. Following these discussions, the Government will consider whether changes are necessary in order to strengthen environmental incentives and protect Exchequer revenues."