Business Secretary’s Office Raised Issue of Patent Box Benefit Following Dyson’s Concerns Over Tax Increases

Kemi Badenoch’s department intervened with the Treasury after Dyson raised concerns about the patent box tax benefit, newly released documents show. During a meeting in June 2023, Dyson representatives, including board member Ian Robertson and founder James Dyson, discussed the impact of rising corporation tax on the effectiveness of the patent box tax relief.

Robertson explained that the patent box, a tax relief benefiting companies that commercialise intellectual property, had become less effective due to the increase in corporation tax. He suggested raising the percentage allowance of the patent box to mitigate this issue. James Dyson personally addressed the issue with Badenoch, arguing that the increased tax burden was limiting Dyson’s ability to invest in research and development (R&D) within the UK. Dyson also highlighted that the company’s reporting requirements were almost identical to those of listed companies, which he felt was unfair.

In response, Badenoch promised to examine the matter, and her department followed up with the Treasury. This led to an official letter from the Department for Business and Trade to the Treasury, which relayed Dyson’s concerns and the company’s request for an adjustment to the patent box benefit. Dyson’s letter argued that the current tax regime was stifling innovation and investment in the UK. Dyson further warned that if the patent box allowance wasn’t adjusted to account for the rise in corporation tax, the company might consider relocating its R&D operations abroad.

The patent box, introduced in 2013 under then Chancellor George Osborne, aimed to attract high-tech companies to the UK by offering a reduced tax rate of 10% on profits from patents. However, the benefit has become less impactful due to successive cuts in corporation tax. Recent increases under Rishi Sunak’s government have prompted concerns from companies like Dyson, who argue that without changes to the patent box, the UK’s tax system could harm its status as a leader in technological innovation.

The Treasury responded that there were no planned changes to the patent box regime, dismissing Dyson’s request. Dyson’s spokesperson explained that the company regularly engages with ministers and that the meeting with Badenoch reflected Dyson’s substantial contribution to the UK economy and its role as a leading innovator.

Badenoch’s spokesperson defended her actions, stating that as Business Secretary, she was always willing to listen to the business community and highlighted the importance of Dyson’s contributions to UK innovation. However, critics from the Labour party have accused the government of prioritising the interests of wealthy corporations while disregarding the needs of ordinary workers.

Recent government figures indicate that in 2022-23, 1,600 companies claimed £1.5bn in tax relief through the patent box, with the majority of this relief benefiting large firms like Dyson.