Start-ups attack Govt over share option tax

Start-ups attack Govt over share option tax
Roy Rubinstein Start-ups are to be hit by new tax legislation despite the government’s recent Budget aimed at encouraging high-tech business in the UK. “There is an element of right hand, left hand here,” said John Whiting, a tax partner for employment at Price Waterhouse Cooper. The measures concern the bringing of national insurance contributions in line with income tax/ PAYE and come into force on April 6. They are designed to curb the practice of companies making large share options awards as a way of avoiding paying national insurance, most notably used by ‘fat cat’ directors of utility companies. However, the further taxes on share options threaten to undermine a key tool used by start-ups and by US firms based in the UK as a way of attracting and retaining key staff. “It’s absolutely crazy,” said Danny Chapchal, chief executive of Cambridge Display Technology, “it’s taxing entrepreneurship.” Whiting agrees: “This will squeeze out a very practical device that gives people an interest in their company.” The taxes will also burden the delicate finances of start-ups, which will suffer a 12 per cent charge when employees exercise their share options. “There is no way to predict the occurrence of this charge,” said Dr Andrew Rickman, president and CEO of Bookham Technology, the optical microcircuit start-up. Such charges could put back Bookham’s profits by a year, said Rickman, putting it at a severe disadvantage to its worldwide competitors. “Many companies, probably in the hundreds in the UK, have had to look at the [tax] issue to see whether the whole share scheme still makes sense,” said Whiting.


Leave a Reply

Your email address will not be published. Required fields are marked *

*