TaxPersonal TaxACCOUNTANCY AGE SPECIAL: Outrage over net tax bill

ACCOUNTANCY AGE SPECIAL: Outrage over net tax bill

Chancellor Gordon Brown has been warned that he risks destroying Britain's e-business revolution by imposing a 'punishing' multimillion pound tax on dot.com companies.

The companies are lobbying the government in a bid to change legislation introduced by the last Budget which imposes a 12% national insurance charge on gains made in unapproved share option schemes by employees.

Last week online auction house QXL was landed with a £15m employers national insurance bill due to the success of company shares held by its 140 staff. QXL’s share price rocketed from 200p to 1600p in the last three months of 1999.

With dot.com company shares continuing to be flavour of the month in the City, a raft of online companies now also face multimillion pound bills.

Accountancy Age has also learned that the Urgent Issues Task Force will be meeting next Wednesday to discuss the growing controversy around how companies account for the tax, which was first flagged in the 1998 Social Securities Act.

Several dot.com finance directors said they were being ‘punished’ for their success, while some have accused the government of failing to deliver on its promise to encourage e-business in Britain.

QXL finance director Robert Dighero said he may form a lobby group and accused the Treasury of ‘stabbing internet companies in the back’.

He added: ‘Although the legislation affects all sectors, IT companies will suffer the most as their shares continue to rise at a rapid rate.

The tax is illogical as the Treasury is treating capital gains as income tax.’

Lastminute.com, the Web start-up founded by Brent Hoberman and Martha Lane Fox, which this week announced it would float soon, also said it would lobby for change.

Finance director Julian Culhane said: ‘This tax bill is absolutely outrageous.

IT companies rely on their employees – and offering shares is the main method of offering incentives to encourage loyalty – but now a number of companies will not be able to afford to do this.

‘It is unfair and nonsensical that IT companies are to be taxed on something that is out of their control. It would be fairer to tax the value of the share when it is given to the employee.’

Finance director protests as internet company hit by £15m national insurance bill despite mounting losses

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