Chancellor of the exchequer Gordon Brown's proposal in the Budget that employers should pass on to employees the cost of their National Insurance contributions on share options, has been described as 'pathetic', 'completely the wrong way round' and 'totally impractical'. While most observers are pleased that the government is addressing the issue of unapproved schemes' treatment, they seem baffled as to why, after consultation, it has plumped for three proposals that have no support, and which mean the employee will pay some or all of the company's NI on share options, at some point. 'It's not simply an issue about NI and whether it is chargeable and who should pay it; it is fundamentally wrong thinking to tax options as income,' said PwC partner Steve Gilder. 'When the providers of capital can exit with a 10% tax rate and creators of capital end up with a 52% tax rate, it is completely upside down.' He added that this attitude towards options is 'the very thing that will stop the UK becoming the internet capital of the EU'.

John Lee of New Bridge Street Consultants believes treating share schemes in the same way as in the US would be 'the logical position' and a means for the chancellor to address the productivity gap between the US and the UK. Head of share schemes at KPMG David Tuch said he would like the position to go back to 'where we were on 6 April last year'
and abolish NI on options altogether. He suggested, alternatively, the introduction of a cap on the gain that could be subject to NI on the exercise of options; or moving to the system used in parts of the EU, where
the individual chooses to be taxed up front on the grant of an option. The company would be charged employers' NI on the value of the option on day one, which would mean having to value the options, as their value would no longer be the difference between the exercise price and the shares' market value, but would include the inherent value of the option.