Dyson tax texts draw PM into lobbying furoreby
At long last, tax advisers have discovered what they have been doing wrong. Instead of trying to seek specific tax advice from somebody who never answers the phone at HMRC, we should all have been texting Boris Johnson’s private mobile number.
According to texts revealed by the BBC on Wednesday, vacuum cleaner manufacturer Sir James Dyson contacted Prime Minister Boris Johnson directly to ask for tax breaks for his staff in March 2020.
The request sought exemptions from PAYE and other taxes for Dyson employees who might fail the statutory residence test while obliged to work in the UK as part of his company’s effort to support the government’s ventilation procurement programme. A key message in the exchange reads:
Rishi has fixed the Country Day Count issue but not Work Days. The former is now covered under an 'Exceptional Circumstances' umbrella, Work Days are not. So, he has freed up your ability to be in the UK but not to work there - even in support of this National emergency
Johnson did not deny the content of the texts during a fiery episode of Prime Minister’s Questions (PMQs) later in the day and responded: “I make no apology at all to shift heaven and earth as any prime minister would do in the circumstances to source ventilators.”
He believed – wrongly it transpires - that our hospitals needed more ventilators than usual channels could supply. As a result, he was willing to bend over backwards when Dyson offered assistance.
Yet even his supporters might squirm at the tone of the texts, which include a line that sounds like an outtake from bad sci-fi movie: “I am First Lord of the Treasury and you can take it that we are backing you to do what you need.”
Deal fell through
The NHS ultimately rejected the ventilator designs proposed by the Dyson empire, which is now primarily located in Singapore, and the provisional plan was abandoned within a few weeks.
While the manufacturer reputedly lost money because the deal was shelved, if it had it been completed the group would probably have made profits that would be taxed at Singapore rates rather than those in the UK.
Sir James clarified that he was “seeking compliance with rules”. In fact, he was seeking a change to the law, which duly arrived the following month as a Covid emergency measure, effectively bypassing Parliament and applying to anyone working in relevant projects.
Labour leader Sir Kier Starmer lost no time in characterising Sir James Dyson as an expat “billionaire Conservative supporter” who had hotlines to both the Chancellor of the Exchequer and the Prime Minister and was given assurances that neither his company nor his staff would face any adverse UK tax consequences as a result of entering into this arrangement.
If nothing else, that means Dyson enjoyed a big competitive advantage over UK-based manufacturers.
The furore may partly stem from recent history. There have been numerous controversies involving deals between HMRC bigwigs and multinational companies that reduced unpaid tax, interest and penalties to palatable sums.
In each of these high-profile cases, had the parties which entered into the settlements paid tax on the correct basis, the amounts received by the Exchequer would have been considerably greater.
At a time when the government is already being accused of “sleaze and cronyism”, the last thing it needs are suggestions that Rishi Sunak and Boris Johnson have both offered to change tax law for the benefit of a friendly tax exile.
Tax policy on the hoof
As a general rule, implementing new tax legislation takes months and very often years. Even the drafting of statutory instruments is a relatively lengthy process.Yet before vowing to do everything he could to fix the situation for Dyson employees, the Prime Minister might have consulted Treasury officials whether promising to make changes to tax legislation for a single supplier was necessary.
John Cullinane, director of public policy at CIOT, accepted that in the emergency situation the outcome would always likely to have been the same. But he raised two areas of concern. First, Cullinane worried that “global multinationals have access that the ordinary taxpayer, who deserves a more reasonable level, does not”.
And second, “The secrecy in our policy making process is going to give rise to more questions.”
The episode is already adding to the government’s discomfort and yet more parliamentary committees will no doubt want to investigate this matter in deeper detail.
The big questions to answer will be with regard to who knew about this extra-statutory concession. Was it actually agreed by Rishi Sunak, officials at the Treasury and/or anyone at HMRC? Inevitably many will also want to know whether the arrangements breached the ministerial code with which we are all becoming so familiar,
Going a stage further, Parliament might wish to have greater control over the fiscal measures implemented in future by the First Lord of the Treasury.