Rishi Sunak’s family face intense questions after it emerged his wife is a registered non-domicile, allowing her to save on paying some tax in the UK.
The status, claimed by around 70,000 people, is entirely legal. People with strong links to another country - for Akshata Murthy, India - pay UK tax only on their UK income, not income abroad.
But there have for years been calls to reform it, as it overwhelmingly benefits the very wealthy.
Mr Sunak has furiously rebuffed questions about his wife’s finances, saying she is a private citizen and not “fair game”. He even compared himself to Will Smith, who slapped Chris Rock for a joke about his wife.
But campaigners say it is entirely fair to ask about the finances of Ms Murthy, as she is daughter of an Indian billionaire, lives in the UK and is wife of the UK’s Chancellor of the Exchequer.
People have also raised questions about the accuracy of statements made by Ms Murthy’s spokeswoman in response to the story last night, and questions about exactly how the arrangement was declared by Mr Sunak.
George Turner, executive director of TaxWatch UK, explained to the Mirror: “She comes from an Indian family, she was born in India and she’s not lived in the UK for that long I don’t think, so she is a non dom.
“That’s a fact, and there is not much she can do about that really. She will become deemed UK domiciled by HMRC after 15 years of being a UK resident.
“The point is whether you choose to claim any benefit from that. You can be a non-dom but then choose not to claim the benefit of it.”
Here, we look at some of the key unanswered questions about the saga.
Was her spokeswoman’s statement accurate?
A spokeswoman for Ms Murthy said last night she “is a citizen of India, the country of her birth and parent’s home. India does not allow its citizens to hold the citizenship of another country simultaneously.
“So, according to British law, Ms Murthy is treated as non-domiciled for UK tax purposes. She has always and will continue to pay UK taxes on all her UK income.”
However, several tax experts have raised questions about this statement.
Arun Advani, assistant professor of economics at Warwick University, tweeted: “Citizenship has *nothing* to do with whether you choose to/not to claim remittance basis in the UK. Most non-citizens are not claiming it, and some citizens ARE claiming it (and, to be clear, this is allowed).”
George Turner, executive director of TaxWatch UK, said: “The statement put by the spokesperson for Ms Murthy suggested it was a necessity for her to claim the tax benefit of being a non dom because she is an Indian citizen - that’s not accurate, she doesn’t need to claim it.
“The point is your domiciled status is determined by your circumstances, and citizenship is only part of it. You can be a UK citizen and a non-dom.”
Labour MP Chris Bryant said: “This is just wrong. Non-dom status is not automatic and the Treasury needs to urgently clarify this inaccurate statement.
“After shutting down legitimate questions about Infosys and its operations in Russia last week, it’s time for Rishi Sunak to come clean.
“This is a Chancellor who just yesterday raised taxes on families who are struggling under the rising cost of living. The British public deserves to know how much he and his family have saved on their own tax bill.”
How much has she saved over the years?
The Independent, which broke the story of her non-dom status, noted it was unclear how much money Ms Murthy has saved over the years.
For example, non-dom status would likely have saved her from paying UK tax on any dividends from Infosys, the India-based company her family owns. Instead she'd pay tax in India.
Her dividend payments could have totalled around £11.6 million in the past year, based on a rough calculation of the firm’s market value and her 0.93% stake.
George Turner, executive director of TaxWatch UK, explained: “What she’s doing is not tax avoidance or some dodgy scheme. Tax avoidance is if you have a tax liability and you avoid it.
“She can choose not to claim the tax benefit, but lots of people can choose not to claim a tax benefit. If you’re a freelancer you could choose not to claim some expenses - but who would do that?”
What exactly did Rishi Sunak declare about it?
It is understood Mr Sunak declared his wife’s tax status to the Cabinet Office as part of his Declaration of Interests when he first became a Minister in 2018.
Sources said HM Treasury was also aware, so as to manage any potential conflicts of interest.
However, what happened after he made the declaration is not clear, because her status is not on his public declaration of ministerial interests.
Business Secretary Kwasi Kwarteng today claimed the Chancellor had been transparent about his family’s business affairs.
But the first register of ministerial interests after Mr Sunak became a minister makes no mention of his wife at all, let alone her business interests.
Guidance to ministers says the list is not “an account of all the interests or financial arrangements held by a Minister or members of their close family. If it were, it would involve unjustifiable intrusion into the private affairs not only of Ministers, but of their close family.
“Rather it is a list of any such interests, which are, or might reasonably be perceived to be, directly relevant to that particular Minister’s public duties.”
So was her non-dom status directly relevant? If not, who decided that and how?
How much money does she keep overseas?
It’s understood Ms Murthy pays foreign taxes on her foreign income. So the question is, how much of her income counts as foreign income, and how much is kept abroad?
This is something we simply don’t know the answer to, but we do know the rules.
HMRC guidance on foreign income states that if you are non-domiciled and your foreign income is £2,000 or more, you must report it but you have a choice.
Either you can pay UK tax on it, or you claim the ‘remittance basis’. This means you only pay UK tax on the income or gains you bring into the UK, in exchange for paying an annual charge of £30,000 or £60,000.
Tax experts told us that, given Ms Murthy’s team have stated she pays foreign tax on foreign income, this suggests she claims the remittance basis.
So the question is how much of her earnings were made abroad, how much were kept abroad, and how much were brought into the UK. This would help assess any (legal) advantage she has enjoyed.
She could choose to switch away from this and pay more UK tax on foreign earnings, which would require lowering her tax bill in India under an existing treaty to avoid ‘double taxation’. More of this below.
How much time does she spend in the UK?
Ms Murthy lives with her husband in a £1.5m Grade II-listed country manor in North Yorkshire, with a sweeping driveway, pond and permission to build its own indoor swimming pool.
Prof Richard Murphy of the Tax Research UK group points out: “Non-dom status is about where a person’s natural home is.
“Essentially, it is a test based on the evidence that they are only temporarily resident in the UK because they retain the intention to return to another place, which is their natural home.
“There are many ways to prove where your natural home is. Family ties are a big issue. So too is retaining strong ties with the country you claim to be your place of domicile.
“For example, you own a house there and only rent in the UK because you intend to leave sometime soon.
“Making no strong ties with the UK is another way of proving this is not your domicile. Choosing to educate your children in your natural home and not in the UK might be another. So too might holidaying there frequently be a good indication.”
It’s understood the Sunak family are currently in Yorkshire, not at their Santa Monica luxury penthouse.
When will she hit the 15-year threshold for deemed domicile?
It’s understood that under current law, Ms Murthy will automatically be deemed domiciled in the UK after living in the UK for 15 years.
What’s not fully clear is when this will happen, i.e., when she moved fully to the UK.
Will she choose to change her tax affairs before that?
Campaigners have argued the Chancellor’s wife does not need to wait for the 15-year cut-off and could change away from the ‘remittance basis’ now.
Tax Justice UK Executive Director Robert Palmer, said: “Ordinary people who face an increase to their national insurance contributions this week will be shocked to learn that the chancellor's own wife is a non-dom.
“This status could potentially save her substantial amounts of tax.
“Tax is about political choices. The government should end tax loopholes such as non-dom status and make sure that those who have wealth pay their share.”
Prof Richard Murphy of Tax Research UK added: “She can give up the claim to be non-domiciled at any time. Just because she was non-domiciled when she arrived in the UK as a newly married person does not mean she has to keep the status now. So the fact she’s still non-dom is also a choice.”
Should the non-dom system be reformed?
Business Secretary Kwasi Kwarteng today argued the system has been around for 200 years - but campaigners say that’s exactly the problem.
There have been some reforms to non-dom status but it largely still exists as it has been for decades.
A study out today from Warwick University found there were around 70,000 current non-doms in the UK as of 2018.
But there were several times more who previously benefited from the status.
And nearly 12,000 - a fifth - of the UK’s highest-earning bankers are non-doms and they have average incomes of over £500,000 a year.
George Turner, executive director of TaxWatch UK, argued: “The real question is whether we should allow non-dom status to exist at all.
“It’s overwhelmingly a tax benefit that benefits the wealthy because there are lots of people who aren’t born in this country, but to have any benefit from non dom status you need to be earning a lot of money overseas.”
