Partners never knowingly overtaxed

Partners in John Lewis, the employee-owned department stores and Waitrose supermarkets group, are being urged to start a letter-writing campaign to defeat Chancellor Kenneth Clarke's plans to phase out tax relief on profit-related pay by 2000.

In a stinging letter to partners David Young, the John Lewis finance director, accuses the Chancellor of killing bona fide schemes such as John Lewis's, which form a significant portion of every partner's salary. Last year the partnership paid out pounds 50m - a third of its profits - to its 36,000 employees.

"I very much regret that the Chancellor did not find a way of discriminating between genuine schemes like ours and the rest," Mr Young wrote.

The removal of tax relief on profit related pay was outlined in Mr Clarke's Budget speech on Tuesday.

The amount of money eligible for tax relief will drop from pounds 4,000 currently to pounds 2,000 in 1998, and pounds 1,000 in 1999. It will be withdrawn entirely in 2000, by which time Mr Clarke claims the Treasury will be saving pounds 3.1bn a year.

Mr Young gave the example of a partner earning pounds 15,000 a year, who last year would have received a profit-related bonus of pounds 1,800 and thus a tax saving of pounds 414.

In 1999 that saving will fall to pounds 230, and will disappear altogether the following year.

"I urge partners to make their voices heard," wrote Mr Young.

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