Budget to promote e-business

Tax measures aim to encourage high-tech startups, share trading
Written by Matthew Broersma, Contributor

Chancellor Gordon Brown is expected to announce measures to boost British business in general and to encourage high-tech startups in particular in his annual budget, to be unveiled Tuesday at 3.30,

Brown is expected to expand tax breaks on share options even beyond the package announced in November's pre-budget report.

Share options have become a popular way for small, growing businesses with little turnover (as is the case with most high-tech startups) to reward their employees. But employers must pay taxes on their staff's income from cashing in options, and that can become an expensive proposition if share values soar.

Brown announced last year that small, high-risk firms will be able to offer low-tax options worth up to £100,000 each to up to 10 key employees, the idea being to help the companies recruit and keep top-level workers. But after industry criticism, Brown may expand the so-called Enterprise Management Scheme to more staff.

Top employees will pay no income tax or national insurance on their options and be able to sell the shares at a reduced rate of capital gains tax. Meanwhile, firms will be able to give all employees up to £3,000 of shares free of income tax and national insurance contributions and subject to reduced capital gains tax.

For shares held as business assets, Brown is expected to reduce capital gains taxes even further. Since 1998, such shares have been subject to a lower rate of capital gains tax after they have been held for 10 years; that period will be reduced to four years.

Riding on a roughly £10bn budget surplus this year, Brown may also launch regional assistance for businesses outside the boom area of south-east England. He may also introduce incentives for businesses to file tax returns electronically.

In February Brown attacked British Telecom, expressing concern that the high cost of Internet access was putting UK businesses at a competitive disadvantage. Internet access costs in the US are half those in the UK.

The budget will also likely introduce major increases in spending on public health and schools.

If Gordon Brown has got his e-commerce friendly Budget right, every person reading this will shortly be contributing to the online revolution. Go with Tony Westbrook to read the news comment.

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