Kemi Badenoch instructed her department to write to the Treasury about a potential tax break after an intervention from Dyson, documents have revealed.
In the minutes of a meeting during her time as business secretary last June, seen by the Guardian, it said Ian Robertson, a board member at the vacuum cleaner and air-filter maker, lobbied Badenoch on the patent box tax benefit that had “worked very successfully but now that corporation tax has risen but the patent box has not losing [sic] its effectiveness”.
James Dyson himself was present at the meeting, where he personally asked Badenoch to address rises in corporation tax. According to the note from the meeting, released under the Freedom of Information Act, Badenoch promised to look at the concerns and the department followed up with a note to the Treasury.
The minutes from the meeting said Robertson “noted the percentage allowance [of the patent box tax] should be increased. SoS noted she would look into this matter.”
The exchange was noted to be followed up with an ACTION, with the secretary of state’s private office to “get note for SoS on the patent box”.
Emails released by a freedom of information request show that the Department for Business and Trade then contacted the Treasury on this specific issue.
When James Dyson himself raised corpor ation tax with Badenoch, the document says he was “noting that the rises lead to a reduced ability for Dyson to invest further. JD [James Dyson] outlined the reporting requirements on Dyson are also almost the same as with a listed company and this should not be the case”. Badenoch’s response to this was to tell him that corporation tax was a Treasury policy.
Badenoch’s department then sent a letter to the Treasury on Dyson’s behalf. The company’s letter, also released under freedom of information, said the current regime was “starving ambitious companies of vital investment cash”.
James Dyson praised the patent box benefit as having been “a very successful policy which allows high-technology, R&D intensive companies to commercialise intellectual property in the UK” but he said the increase in corporation tax at the March budget had not been offset by improvements to the patent box benefit.
“If the patent box allowance were to be increased in line with the corporation tax increase, that would go some way to encourage technology companies like Dyson not to move their R&D operations away from the UK,” the letter said.
“As things stand, the stated aim for Britain to be a ‘science and technology superpower’ is being badly undermined and threatened entirely by an ever-growing business tax burden.”
A Treasury official wrote back to Badenoch’s department, according to an internal email, saying there were “no changes to the regime planned, so nothing particularly interesting to say on it”.
A Dyson spokesperson said: “Dyson, like most large companies in the UK, has routine meetings with ministers. This conversation with the then business secretary reflects the fact that Dyson is one of the biggest filers of patents in the UK, has invested billions in the UK economy and is a significant employer of engineers here.”
A spokesperson for Kemi Badenoch said: “James Dyson is one of the country’s most successful inventors and entrepreneurs and Kemi was persuaded by his arguments on the patent box tax relief. As business secretary, Kemi was always ready to listen to business, in stark contrast to this Labour government that has ignored and ostracised business at every opportunity.”
The patent box, introduced by George Osborne in 2013, was aimed at encouraging UK-based hi-tech companies to commercialise innovation, by allowing them to pay corporation tax at a rate of just 10% on the proceeds of new inventions.
He was forced to water down the policy before it was introduced, making clear that it must relate to innovations developed and patented in the UK, after Germany objected, arguing it could encourage multinationals to artificially shift profits around, in order to minimise their tax bills.
The main corporation tax rate at the time the patent box was introduced was 23%, so that firms could more than halve the tax they paid on their profits from innovation.
But Osborne then cut corporation tax progressively, to 19% by 2017, in an attempt to attract foreign investment, so that over time the policy came to offer a less significant discount.
Rishi Sunak more than reversed these cuts, increasing corporation tax to 25%, where Rachel Reeves has promised it will stay until the end of this parliament.
A Labour spokesperson said: “It comes as no surprise that Kemi Badenoch would lobby for tax changes for the super-rich.
“Clearly the Tories have learnt nothing. Kemi Badenoch said a flat tax rate is an ‘attractive idea’ – a policy which would hike taxes by £1,200 on lower earners. While Kemi Badenoch campaigns for favourable tax arrangements for the super-rich, Labour stands on the side of working people by delivering a plan for change with investment and reform to deliver growth and put more money in people’s pockets.”
The latest government data shows that 1,600 companies took advantage of the patent box in 2022-23, claiming a total of £1.5bn in tax relief – with 94% of that benefiting large firms.
