E-PAY
National insurance on share options a "disaster", says high-tech industry
The Computing Services and Software Association has warned the UK government that it risks losing high-tech start-ups to other countries unless it moves quickly to resolve the "damaging impact" of national insurance contributions (NIC) levied on share option schemes.
The association, which has 700 members representing about 80% of the industry by turnover, wants the government to revert to the pre-1999 arrangements.
According to a CSSA survey of over 100 members, the NIC change will cost companies between £20 million and £70 million this year.
Director general John Higgins said:
"A number of companies reported they were making provision for NIC that may well substantially lower or wipe out their profits over the next few years. We cannot believe the Government intended the tax to have this effect."
Mixed response to Treasury proposals
Treasury ministers have had "a mixed response" on its proposed solution which involves shifting the burden of NIC payment from employers to employees, says a report in the Financial Times newspaper on 12 May 2000.
Bitter row
The dispute has been rumbling on for the past year following the Inland Revenue's decision to impose national insurance charges, currently 12.2%, on unapproved employee share option schemes. For many companies in the internet economy, share options are the main way of luring staff and stopping them from walking out of the door.
Many high-tech companies, including some of the biggest US technology investors such as Cisco, Oracle, and Sun Microsystems, have urged the government to drop the charges to avoid hitting cash-strapped dot-com companies, the Financial Times reports.
Want to know more?
The Computing Services and Software Association's web site is a click away . . . www.cssa.co.uk
Visit the Financial Times online at www.ft.com and type "share option schemes" into its global archive search box — you will find a series of reports on this issue.