SOME of the country’s wealthiest financiers will be spared millions of pounds of income tax payments after an extraordinary U- turn by Chancellor Gordon Brown this weekend.

The Treasury has agreed to rewrite Brown’s Budget so that highly paid executives in venture capital companies can continue to pay only ten per cent rather than 40 per cent on a large slice of their earnings.

Brown had accidentally caught venture capitalists in a wider attempt to tighten the law on taxing share options in mainstream businesses.

That would have ended a deal struck in 1987 under which all venture capital profit-share payouts known as carried interest attract tax at capital gains rates, currently 10 per cent.

Carried interest is essentially the profit venture capitalists make on a deal once they have repaid their investors.

It can mean multimillion pound windfalls for some financiers.

The Government has bowed to pressure from the venture capital industry following the threat by some large companies to shift their operations offshore if the tax concession was eliminated.

But Brown’s change of mind is likely to alarm many Labour backbenchers who are critical of the Chancellor’s efforts to shield wealthy individuals from a rate of tax paid by millions of ordinary wage earners.

The venture capitalists have had to give some small concessions, but senior industry sources told Financial Mail there was ‘great relief’ that the Government had agreed largely to continue the tax breaks.