EIM31530 - Employee Car Ownership Schemes (ECOS): payments of employee’s personal (pecuniary) liability
Introductory remarks, common to this section of the guidance
Unlike car benefit and car fuel benefit, no single body of legislation deals with ECOS. Instead, the relevant law when considering ECOS is drawn from various parts of the employment income and NICs legislation.
This guidance does not attempt to cover all relevant parts of the legislation in detail. Instead, it seeks to draw the essential aspects together in order to identify where tax and/or NICs can be payable under the normal benefits and expenses rules as they apply to ECOS.
The same principles apply to ECOS vehicles as to any privately-owned vehicles used for business travel.
Unlike the remainder of this manual, EIM31500 to EIM31599 cover both tax and NICs.
Payments of employee’s personal (pecuniary) liability
These are payments which the employee was legally responsible to make but which are instead paid by someone else (normally, the employer).
For tax, such payments are not mileage allowance payments (MAPs), precisely because they are not paid to the employee. They are not within PAYE, but instead are reported on form P11D for the tax year at section B. The amount so reported is added to the employee’s earnings for tax (but not payroll) purposes.
This is explained at EIM00580 and the PAYE treatment at EIM00590.
For NICs, they can be of 2 kinds:
- payments would have been MAPs had they been paid to the employee, or are otherwise in respect of the use of the vehicle but are not a payment in kind (e.g. payment of a servicing or repair bill for which the contract was with the employee) are Relevant Motoring Expenditure (RME, Reg 22A(3)(b) SSCR 2001, SI 2001 No 1004, as amended by SI 2004 No 770) and come within the NICs mileage scheme, see brief summary at EIM31585.
- all other payments of the employee’s personal (pecuniary) liability (e.g. payments direct to the loan provider of amounts due from the employee under the ECOS): these are earnings subject to Class 1 NICs. They should be added to any other earnings paid in the same earnings period when calculating Class 1 NICs.
Other kinds of transaction in favour of the employee
These are listed with links to the relevant guidance at EIM31520.