PracticePeople In PracticeTreasury to back down on dot.com share tax

Treasury to back down on dot.com share tax

Ministers are preparing to 'pull out all the stops' and back down over their initial reluctance to overhaul the national insurance treatment of dot.com companies' share options.

Despite its hard-line stance on other areas of last week’s controversial Finance Bill, including changes to the tax regime of multinational companies based in the UK, Treasury officials said this week they were bringing forward their review of unapproved share options.

Inland Revenue officials were locked in a meeting with CBI representatives to thrash out a solution as Accountancy Age went to press. In the Budget Gordon Brown disappointed the dot.com community by only promising to review the climate.

But a Treasury spokeswoman said this week: ‘We are pulling out all the stops. We would like to have a decent steer on how to move the process forward in the fairest possible way and we would like to see a solution produced sooner rather than later.’

In the next few days financial secretary Stephen Timms is expected to meet the CBI and 15 hi-tech companies – including online auction website QXL and internet technology manufacturer Cisco Systems – to thrash out a deal. Cisco is set to confirm whether the company scrap plans to employ an extra 4,000 staff in the UK because of the dispute.

The solution favoured by the government is to move the tax burden away from the companies and on to the individual shareowners when they exercise the options. But dot.com companies are expected to resist that solution as they argue that without scrapping the NI charge altogether, the government’s attitude to share options will send the wrong signals to the dot.com community.

A solution is seen as central to backing up ministerial claims that they want to make the UK the best environment in the world to trade electronically within two years.

At the same time as the meeting in London, Gabs Makhlouf, director of the Revenue’s international division, told a conference in Lisbon that the UK was determined to find a ‘practical’ solution to e-business taxation.’Governments and businesses need an outcome that allows e-commerce to flourish, that keeps down compliance costs, and that is enforceable,’ Makhlouf said.

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