TaxPersonal TaxInternet start-ups protest over multimillion pound national insurance bills

Internet start-ups protest over multimillion pound national insurance bills

Dot.com companies fear the government will fail to meet their demands for changes to the national insurance treatment of share option schemes, despite the promised review announced in the Budget.

Last week chancellor Gordon Brown failed to deliver any concrete proposals for changes to legislation – but said he would ‘consider’ change. But dot.com companies remain fearful their concerns will not be heard.

The Inland Revenue promised to consider a range of options including allowing all or part of employers’ NICs on unapproved share option to be met by employees. It admitted the ‘suggestions would give employers, particularly those with high growth potential, much more certainty about their exposure to NICs liability’. But officials failed to say when they would legislate or what form that legislation would take.

Under existing legislation companies have to pay national insurance contributions on employees unapproved share option schemes, despite having no control over when the schemes are exercised.

QXL, the internet auction site, suffered an NIC bill last year approaching £15m. Financial director Robert Dighero said that despite the promised review the government was unlikely to listen to the sector’s concerns and said unless the rules were simplified, the UK would not be an attractive environment for entrepreneurs and start-up companies.

QXL is due to meet the Inland Revenue and the Treasury over the next few weeks in a bid to thrash out a compromise.

Dighero, said: ‘The government gave out the wrong message to dot.com companies in the budget. The chancellor has said he will look at the possibility of shifting the NIC’s onto the employee rather than the employer.

‘However this is not a bold enough move. The problems have begun because at the moment capital gains is being treated as income and taxed accordingly.

‘However there is a glimmer of hope as the chancellor has signalled a willingness to engage in consultation. But overall the message the government is sending out by merely wanting to shift the burden to employees is not exactly encouraging for small hi-tech companies.’

AccountancyAge.com feature: Are dot.com investors living in wonderland?

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