`(1) Where a right to acquire shares has been the subject of a notice under section 1 above and the payment of a special contribution under section 2 above, and that right subsequently ceases to be exercisable to any extent then at the appropriate time an appropriate person may make a claim for the repayment of the appropriate amount.

(2) The procedure for making a claim under this section shall be governed by regulations made by the Inland Revenue pursuant to section 1(5) above.

(3) In this section

(a) the ``appropriate amount'' is the amount of the special contribution in question, reduced to take account of any tax relief (if any) given on the original payment of that special contribution, apportioned on a just and equitable basis agreed with the Inland Revenue to the extent that the right has ceased to be exercisable;

(b) the ``appropriate person'' is the person who paid the special contribution in question;

(c) the ``appropriate time'' is the period of twelve months commencing with the end of the year of assessment in which the right in question has ceased to be exercisable to any extent.'.—[Mr. Flight.]

Brought up, and read the First time.

I beg to move, That the clause be read a Second time.

I referred to the new clause when we discussed amendments to clause 1. It is a possible alternative to our first suggestion of a special NIC crystallising on exercise and would provide for repayment of NIC, with a facility for partial repayment if only part of the option lapses because the share is under water or someone has left employment. The Minister said that the Government intend the Bill to provide that quid pro quo, but it is unsatisfactory for companies or employees to pay tax that they do not need to pay and it is not proper to ask people to gamble on an outcome. The Government should consider the new clause as a possible option to cover that.

The new clause is contrary to the spirit of the Bill. Our aim is to allow companies to obtain some certainty and, inevitably, a judgment must be made. It is a voluntary measure and employers will have to consider whether settling the NIC at the share price on 7 November 2000 is right for them. They will have to make a judgment on whether the benefits of early settlement outweigh the risk that the share price might fall or that options will not be exercised.

The Bill gives companies the chance to arrive at a once-and-for-all decision on what is in their best interests. It provides the certainty that they asked for in relation to their liability on gap options. If refunds were allowed, the certainty that companies have asked for would be undermined, and that would undermine the whole purpose of the Bill. The certainty that is provided by the Bill is valuable for companies and the Exchequer, and I hope that the hon. Gentleman will not press the motion to a vote.

The new clause would not undermine certainty. If companies pay the special NIC, that discharges the future employer's NIC liability. All it does is to provide that if no NIC is payable because the option lapses, the NIC will be paid back. It would not undermine the principle of certainty. It boils down to whether the Committee believes that the quid pro quo gamble on NIC liability is a principle that we want in our tax law. Our view remains that that is undesirable, and that it would be fairer, if NIC liability is not to apply on exercise, to provide that it will be refunded if options are not exercised. The Government have made it clear that they are keen on their quid pro gamble, notwithstanding the concerns of many eminent tax lawyers. I shall not carry the argument further, but perhaps the Minister will think about it a little further in his bath ahead of Report stage. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.