Treasury rethinks share tax

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The Independent Online

A delegation of finance directors from some of America's largest computer companies are to meet Chancellor Gordon Brown next month to vent their spleen over the UK's tax system. The meeting represents the first sign that the Treasury is preparing to offer concessions on the deeply unpopular introduction of national insurance on share options.

A delegation of finance directors from some of America's largest computer companies are to meet Chancellor Gordon Brown next month to vent their spleen over the UK's tax system. The meeting represents the first sign that the Treasury is preparing to offer concessions on the deeply unpopular introduction of national insurance on share options.

A string of American software companies have this year threatened to halt the creation of thousands of jobs in the UK as a result of the tax.

It is understood that finance directors from Cisco, Oracle, Sun Microsystems and JDS Uniphase were invited earlier this month by Treasury finance secretary Stephen Timms to meet the Chancellor.

In a packed meeting at Cisco's offices in San José, Mr Timms told the executives that national insurance on share options was still a "live issue" and urged the delegates to meet his boss.

It is understood that one idea under consideration is to give the IT companies facing a hefty tax burden relief in the "gap period" - the time before the new tax rules were changed in April.

Flanked by Diane Hay, the assistant director of the Inland Revenue, and Christopher Martin, his private secretary, Mr Timms said that giving the finance directors some "face time" with the Chancellor might help in finding a solution.

Sources close to the Treasury revealed the timing of the meetings could be critical.

Mr Brown is understood to be considering announcing a further period of industry consultation on the effects of national insurance in his November pre-Budget statement.

One idea being banded around the Treasury is to relax the rules on "approved" share option schemes - situations where companies and employees are exempt from the tax.

At present, companies can issue up to £30,000 worth of share options per employee without paying the 12.2 per cent levy. Instead, capital gains tax is paid on the shares. It is understood that the Treasury is considering raising the threshold, which could be included in the next Finance Act, due in the summer of 2001.

If the Government stages a U-turn on the issue, it will go some way towards restoring its damaged IT credentials.

Veritas, the world's fourth- largest software company, put the creation of 2,000 UK jobs on hold in July because of the tax. The company calculated that the new tax increased its liability from £300,000 to £8m.

Similarly, in May Oracle, the US software company headed by Larry Ellison, warned that the creation of up to 1,000 jobs would be directed away from the UK as a result of the tax.

The share option levy is also thought to have hit thousands of UK dot-com start-ups which use options to tempt and retain staff.

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