Veritas blames tax change as it holds back £250m investment

Veritas, the US software group, is holding back £250m in investment in the UK, claiming that Government changes on taxing stock options stifle innovation and drive up costs.

Veritas, the US software group, is holding back £250m in investment in the UK, claiming that Government changes on taxing stock options stifle innovation and drive up costs.

The group, which with a market capitalisation of about $60bn is the world's fourth largest software firm, yesterday said it would go ahead with a £250m investment to create 2,000 jobs in a new European headquarters in Reading and a facility in Watford. However, it plans to wait before injecting a further £250m and may even choose to invest in Ireland instead. "We will wait to see what the business climate is like in the UK over the next 12 months. We have a company based out of Ireland which is very successful but our preference would be the UK," said Lindsey Armstrong, the group's European vice-president. The Government introduced measures in April 1999 to hold both employers and employees responsible for gains arising when share options were exercised outside an approved scheme.

Phil Bousfield, Veritas' head of worldwide operations, said the measures had increased his firm's liability from £300,000 to £8m. The latest proposals, announced in this year's Budget, would allow employers to transfer liability for National Insurance contributions (NICs) to employees in a voluntary arrangement. Veritas has created 49 millionaires in its Chertsey office since it came to the UK five years ago but Mr Bousfield said the new rules would make employees reluctant to enrol in share option schemes. "What this proposal does is make a stock option issued by Veritas in the UK worse than a stock option issued anywhere else." He said the Government had inappropriately lifted the model from the US, an economy with greater venture capital funding and a business culture happier to take risks.

A Treasury spokeswoman said many of the 50 businesses consulted were in favour of change. "We welcome Veritas' announcement to create new European headquarters. The UK realises that it has lessons to learn from the US but these measures have been designed to address market-recognised weaknesses in the UK, not to simply copy the US."