Outlook: Kingston Communications

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THE DECISION by the Inland Revenue to force Kingston Communications to make its employee share scheme slightly less generous must have companies up and down the land wondering where this new found zeal is heading. It is no surprise that the folk who run the telephone system in Hull have decided to appeal.

What they and the rest of the world would like to know is whether this is part of a new clamp down by the taxman on supposed "get rich quick" schemes, or just a one-off intervention with little longer term consequence.

According to the Revenue it is simply a matter of procedure that its Share Valuations Division examines situations where it feels there is a need. It clearly thought such a need existed in the case of the Kingston saying that it felt the float price of 225p was too cheap and that the staff options should be priced as if it had been floated at 280p.

It might seem odd that the civil servants at the tax office would feel more able to judge the market value of a soon-to-be public company more accurately than Deutsche Bank and Robert Fleming, the two firms who advised on the float.

It might also seems odd that the revenue should concern itself with a scheme that seems unlikely to make anyone rich and certainly not quickly. Given that individuals are allowed to make pounds 7,100 of capital gains in a year before they are subject to taxation on the gain, Kingston's workers would have to have bought an awful lot of shares to qualify. It might also seem odd that the Freeserve scheme, where the shares were also priced low and then surged to a huge premium, was waived through by the revenue without a second glance.

Or does the revenue simply have a hang-up about wider share ownership in Hull? Strange.

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