Why non-dom status of Rishi Sunak's billionaire wife Akshata Murty is controversial

Akshata Murthy claims she is domiciled in India for tax purposes in accordance with British law, yet experts say it is her choice

Rishi Sunak and his wife Akshata Murthy are facing further scrutiny over their finances. Reuters

For the second time in the space of just a few days, the family finances of UK Chancellor Rishi Sunak have been dragged kicking and screaming into the public spotlight, as the revelation of his wife's non-dom status left him exposed to accusations of “breathtaking hypocrisy".

First, the Indian tech company that Mr Sunak's wife, Akshata Murty, owns a $1 billion stake in came under scrutiny for its continued presence in Russia, despite the UK imposing severe sanctions on the Kremlin over its invasion of Ukraine.

Infosys succumbed to increasing pressure last week and announced it was withdrawing from the country, but respite for the chancellor and his billionaire wife was brief.

It emerged on Wednesday that Ms Murty had claimed non-domicile status in the UK, despite living in the UK for over 13 years and not having a family house in India, the country in which she is domiciled.

Why does Akshata Murty have non-dom status?

Non-dom is a diminutive of non-domiciled and applies to people considered under British law to have their permanent residence in another country.

The status is controversial as those registered as non-domiciled avoid paying UK tax on foreign earnings, unless it is brought into the UK or deposited into a UK bank account.

Non-doms do have to pay tax on UK earnings, however.

Responding to the furore created by Ms Murty' outing as a non-dom, a spokesman said she claims non-domicile status for tax purposes in the UK.

“According to British law, Ms Murty is treated as non-domiciled for UK tax purposes” because of her Indian citizenship, he said.

Why is the non-dom status disputed?

The statement has been called into question by tax experts.

“It's just not how it works. You have to tick a box on your tax return, claiming what's called the remittance basis. An actual box. So that's a choice that she made,” Dan Neidle, a senior tax lawyer, told PA news agency.

To qualify as a non-dom, a person must prove to the UK tax office that their domicile is in another country. Usually the domicile will be their country of birth or somewhere they intend to retire.

These criteria may well have applied to Ms Sunak when she first moved to the UK 13 years ago, but another tax expert questioned why the status has not been interrogated subsequently.

Quote
I'm not challenging anything that she's done with regard to legality, nothing at all. What I'm saying is that there was an ethical choice that she made and she continues to make ... to say I want to be considered non-dom.
Professor Richard Murphy, Tax Justice Network

“After 13 years of marriage, it does appear as though she's here, has continually been here, married to a man who's obviously intending on being here, has children who are being educated here, has no house in India etc.", Prof Richard Murphy, the Sheffield University academic who cofounded the Tax Justice Network, told PA.

“If I was a tax inspector — and I'm not — I could ask the question 'Are you really still non-domicile?'

“I'm not challenging anything that she's done with regard to legality, nothing at all. What I'm saying is that there was an ethical choice that she made and she continues to make … to say I want to be considered non-dom.”

Mr Neidle said HM Revenue and Customs should regularly review the non-dom status of the wealthy.

“You think they'd at least start polite inquiries,” when the non-dom status of those linked to prominent people is revealed in newspapers, he said.

Agreeing with Prof Murphy, he said that while the statement may be questionable, Ms Murty's tax status is likely to be legal.

“I'm not saying it's wrong, it's probably a very defensible position to take.

“My question would be if it is right that the wife of the Chancellor of the Exchequer should benefit potentially to the tune of tens of millions a year from a rule which the Chancellor is responsible for potentially changing, tightening up or scrapping.”

Brand-conscious Sunak under fire

Given Mr Sunak's perceived desire to build his personal brand, the latest controversy surrounding him will be particularly unwelcome — and it may take more than a few photo opportunities to cleanse his image.

The optics are particularly unforgiving coming just days after he hiked national insurance in the UK for anyone earning more than £30,000 ($39,219) a year.

Unsurprisingly, political opponents seized on the chancellor's predicament on Thursday.

Labour leader Sir Keir Starmer told broadcasters Rishi Sunak was “out of touch".

“The chancellor has imposed tax rise after tax rise on working people. And he's said time and again there's no alternative, we've got no option,” he said.

“If it now transpires that his wife has used schemes to reduce her own tax, then that's breathtaking hypocrisy and only goes to show it's more evidence of just how out of touch this chancellor is.

“And I think he's got very, very serious questions to answer in relation to these schemes.”

Asked if Ms Murty should change her tax status, the Labour leader said: “We need complete transparency on this so that we can all understand what schemes she may have been using to reduce her own tax.

“But to use a scheme when the chancellor is out there day after day saying we need tax rises on millions of people in this country who are really, really struggling is breathtaking hypocrisy.”

Labour's shadow Treasury minister James Murray said he had written to the chancellor asking for urgent answers and that the UK tax system must “be built on fairness and consistency".

Liberal Democrat Treasury spokeswoman Christine Jardine called for Mr Sunak to “come clean” about “which country his family pays tax in abroad and if it is a tax haven".

She also urged the government to close the “loophole” that allows spouses to claim non-dom status while MPs have to be treated as tax residents.

Updated: April 08, 2022, 8:48 AM
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