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BUDGET '07: Stay of execution for ECO schemes
Date: 21 March 2007
Surprisingly, Chancellor Gordon Brown has resisted the temptation to tweak AMAP rates to the detriment of cash opt-outs and ECO schemes.
ECOS providers have been united in lobbying Gordon Brown to maintain the current status quo that provides a tax advantages against running a company car.
Brown has, however, reitterated environmental fears about the schemes.
It was thought Brown was against those opting out since Government statistics suggested the average ECOS cars had emissions 20g/km higher than a company car.
The last minute reprieve may be short-lived, with the Chancellor reserving the right for his successor to put AMAP rates under review for this year's Pre-Budget Report.
In the Budget report Brown said: "Budget 2006 announced that HMRC would review the taxation of employee car ownership schemes (ECOS) and the benefits employees derive from them, with a view to possible changes. HMRC has undertaken extensive discussions with business during summer 2006 and January 2007, which demonstrated there are a number of different ECOS schemes, and that there is a noticeable interaction between the tax treatment of ECOS, tax-free mileage allowances (AMAPs) and rates of company car tax, which may have contributed to the popularity of ECOS.
"Furthermore, the review has suggested that the more structured ECOS schemes make extensive use of AMAPs to reduce their tax and NICs liabilities, which may provide a potential incentive to drive a greater number of business miles. Therefore, ahead of the Pre-Budget Report [2007], the Government will consider the case for changing the structure of AMAPs to align the tax/NICs treatment and to ensure that rates and thresholds are set at an appropriate level to promote environmentally friendly business travel."
