The decision by technology giant Dyson to relocate its headquarters to Singapore could see the company enjoy significant tax benefits, depending on where it registers the intellectual property for its next generation of products, a leading tax expert has claimed.
Dyson sent shockwaves across the business and political worlds last weekwhen it announced the relocation from Wiltshire, which will see two senior executives move to Singapore. Chief executive Jim Rowan insisted the decision was nothing to do with Brexit or tax but rather to “make us future-proof”.
Experts agreed the move would have little impact on the tax Dyson pays on its current product lines.
“It is unlikely Dyson will change existing tax structures much,” said Richard Murphy, professor of practice in international political economy at City, University of London, who runs the Tax Research website and is a co-founder of the Tax Justice Network.
“There would be a heavy capital gains cost for moving existing intellectual property [IP] out of the UK and the UK patent box is already attractive to the company. But if it hopes to be a market leader in electric cars – and that seems to be its plan – then thousands of patents may follow.”
Where these patents are located may prove crucial to the company’s fortunes, Murphy said. “Singapore does not tax income earned outside its territory and is fairly relaxed about a company locating income and IP in tax havens. So Dyson could win heavily in the long term, in tax terms,
if its electric cars do prove to have a winning technology – which may give rise to largely untaxed income in any new structure.”
A spokesman for Dyson said: “The change is about the movement of two senior executives and the legal entity. This recognises the increasing significance of Asia to Dyson; an increasing majority of Dyson’s customers and all of our manufacturing operations and production are now in Asia.
“This shift has been occurring for some time – which we have long communicated – and will quicken as Dyson brings its electric vehicle to market. There will be no impact on the physical location of any teams, the ownership of IP will not move, and our patent-filing strategy will not change. The impact on where Dyson pays its tax is negligible.”
When asked where Dyson’s IP is located, the spokesman said: “All IP generated in the UK will be registered and taxed in the UK. We do also develop IP elsewhere.”
Singapore’s fiscal system has been lauded by a number of senior Tories and business leaders who have been promoting Brexit. Both Theresa May and Philip Hammond have threatened to turn the UK into a low-tax economy –the Singapore of the west – if a deal with the EU cannot be found. Jacob Rees-Mogg’s investment firm, Somerset Capital, has operations in Singapore as well as the Cayman Islands tax haven.
But Murphy said it would be hard for the UK to replicate the Singapore model. “More than 80% of people live in government-owned housing so it does not need to tax people, it just charges rent. And many of its largest companies are also state-owned so, again, local taxes on profits do not matter as much as they do in the UK, because the government gets a large chuck of local profits anyway. It can offer low taxes and not have its revenues threatened. This is fundamentally different to the UK, where the government is dependent on tax.”
Murphy said other companies may follow Dyson’s lead. “This could be the start of an exodus. The UK post-Brexit will not be able to impose sanctions on anyone leaving because it would deter anyone coming in, and we will be desperate for every friend we can find. In that case there is an increased risk that companies will leave for even lower-taxed locations, which we cannot emulate without abandoning the NHS, state pensions or state education.”