James Dyson, the legendary British inventor, and billionaire made a difficult decision to move the company headquarters to Singapore in order to launch the new Dyson electric car. Dyson is synonymous with innovation like Elon Musk and has invented its own vacuum cleaner technology as well as its unconventional solid-state battery. The move to Singapore attracted a lot of criticism as people naturally assumed the decision was motivated by the low-income tax rates in Singapore which do not exceed 22% as compared with the 45% in the UK. In addition, Singapore has no capital gains tax or inheritance tax. At the time, the small corporation tax differential of 2% was not considered to have any bearing on the decision.
In his defence, Dyson pointed out that the skilled workforce required was available in Singapore and on made sense to ‘produce where you sell’. By locating the factories in Singapore, he could also customise the cars to local and regional consumer preferences in SE Asia. He has now decided that making the electric cars is not commercially viable and has moved the company’s HQ back to the UK. It is worth noting that James Dyson has now moved his own personal residency back to the UK and sold his Singapore penthouse for £62 million.
As the second wave of the COVID pandemic started sweeping the UK, Boris Johnson asked James Dyson to send his overseas engineers to the UK to make ventilators. Naturally, the engineers were concerned about becoming UK resident as this could trigger a UK tax liability.
When establishing an individual’s residency, we first apply the automatic non residency tests and you are non-resident if you are in the UK for less than 16 days (already UK resident), less than 46 days (non-residents) or less than 91 days (work full time overseas).
The next step is to consider the automatic UK residency tests and you are UK resident if you are in the UK for 183 days (non-residents), 30 days (only UK home) or work full time in the UK.
If the automatic tests do not apply the final step is to establish the number of ties the individual has to the UK.
The first tie is the family tie and arises if you have a spouse or a child under the age of 18 living in the UK. The next tie is the employed tie and arises if you do substantive work in the UK (at least 40 days). We then look for a days tie to the UK which arises if the individual has spent at least 90 days in the UK in either of the two previous tax years.
Next, we consider the accommodation tie where you made use of accommodation and it is available to you for at least 91 consecutive days in the tax year. With the accommodation tie it is not necessary to rent or buy the accommodation yourself.
The final tie to consider is the country tie where the individual spends more time in the UK compared to any other country. It is worth noting that the country tie only applies to individuals leaving the UK.
Based on the 5 ties and the days the individual spends in the UK, they can either be treated as UK resident or non-resident in the tax year. These rules are all included in my Advanced Tax condensed notes that are available for purchase.
As a result of this, the Dyson employees would become UK resident and subject to tax on their worldwide income although non-UK domiciled individuals can make a remittance election in respect of their overseas income.
Boris Johnson naturally gave them an exemption as they were coming to the UK to serve national interests but has now been criticised for this as he did not consult parliament.
The ventilators have now been sent to India as fortunately, the UK did not actually need to use them.
Do you think it was right for the Dyson employees to get a tax waiver?