On Tuesday 10th January the news broke that Snap, the company behind Snapchat, is setting up an international office in Soho, London. This involves expanding the existing office and UK workforce and handling all sales from countries outside of the US (as well as recognising the accompanying revenue).
The news of the move is being heralded as a win for post-Brexit UK and certainly any taxes paid on UK and international sales will be a welcome addition to the Treasury’s coffers. It’s also fantastic news for London’s major #LondonIsOpen campaign.
However, this could be seen as a slightly unusual move for the US technology company as many of its industry peers, including Facebook, Apple, Google and Twitter, have set up international headquarters in countries like Ireland with lower corporation tax rates than the UK
Ecovis we believe the move raises some very interesting questions, most importantly, why?
With so much happening in the world, why has Snap chosen London, specifically Soho as the location for its international headquarters? As Soho dwellers ourselves, we are well aware of the benefits of working in this area and certainly welcome our new neighbours but is the great coffee and delicious food really the main draw?
In all honesty, probably not (delicious as it is!), so what is it?
Let’s take that corporation tax point to begin with. The current UK corporation tax rate is 20%, but HMRC have issued forward guidance that this rate will reduce to 19% from 1 April 2017 and to 18% from 1 April 2020. This will be much lower than the European average of 24%, but is still considerably higher than the standard trading rate of 12.5% in Ireland. So, whilst this makes the UK a comparatively attractive location for Snap and other overseas businesses, it cannot be the only reason.
There is also the possibility that, given that the UK is now free of the European shackles, free to lower the corporation tax, perhaps these businesses are hedging the bets, readying themselves for the post-Brexit tax benefits that are sure to follow? Is the UK the new Ireland?
Or could it be a reaction to Trump’s election into office and concerns about the impact on the US economy? Trump’s attacks on internationally diverse and expanding businesses have not gone unnoticed. General Motors was recently branded as a traitor and un-American for building some of its cars in Mexico. Perhaps high profile companies like Snap are moving to more welcoming and accepting locations?
Or is it a vote of confidence in post-Brexit UK as a business destination in its own right? London, and in particular Soho, has always been a creative hub and there is no doubt that Snap will have access to some of the best talent the creative and technology industries’ have to offer.
Of course, it could be a lot simpler than that. There are around 10 million people in the UK using Snapchat daily. Is Snap simply moving to where its biggest market is located?
Unfortunately, we don’t have the answer. In all likelihood it is a combination of all of these reasons, resulting in some great news for post-Brexit UK. Whatever the reason, we’re looking forward to seeing who follows in Snap’s footsteps.