Accountancy firm RSM has warned that the HMRC draft legislation to make employee car ownership schemes (ECOS) liable for company car tax, could hit car sales.
It has been joined by Robert Forrester who has written to the Treasury outlining the impact the legislation could have on the market.
Anthony Cox, partner and motor retail specialist at the firm said dealers and carmakers were concerned the impact on the new car sales.
“Although the draft legislation sets out to target contrived ECOS and ensure fairness for taxpayers, the wider motor retail industry is concerned by HMRC’s proposed changes given their potential impact on the consumer market and jobs in the industry.
“ECOS often made vehicles more affordable for employees, especially in motor retail, so removing these schemes could lead to fewer cars being available to buy through the nearly new market.
“There are further concerns from car manufacturers that the impact of these changes may have a knock-on effect on jobs across the automotive industry.
“In addition, while the government’s tax take may rise in the short term, in the long term, there are concerns in the industry that this aim may not be realised, nor do manufacturers expect that the changes will push employees into electric vehicles.
“There are fears that this legislation could have a detrimental effect on the UK automotive industry, as employees of manufacturers (and to some extent, retailers) seek out older, less clean cars, or look to manufacturers from outside the UK.”
He added: “Whilst we understand the industry made the government aware of these broader concerns, and despite the stated initial plans to target contrived schemes, the legislation is so broad that it not only removes ECOS as an option, but also raises concerns about its potential impact on PCP arrangements for employees.
“HM Treasury’s approach has also come under fire for consulting with OEMs and SMMT to plan the parameters of the legislation, rather than listening to manufacturers’ feedback to improve fairness and consistency.”
“Employers in other sectors can offer their own products to staff at cost, without a taxable benefit arising, yet the company car legislation does not allow for this, creating an uneven playing field.
“Moreover, the timing of the proposed changes presents further challenges. If the legislation is passed, businesses will have little more than a year to adapt before the October 2026 deadline.
“This contrasts with recent car benefit changes around double-cab pick-ups, and the introduction of Optional Remuneration Arrangements legislation in 2017, both of which included grandfathering provisions to ease implementation and reduce disruption.”