Revelations that Rishi Sunak’s wife chose to avoid paying UK income tax through her non-dom status have created a political storm for the chancellor. But were they in the wrong?
“It’s frankly been pretty much the worst week that Rishi Sunak, the chancellor’s had since taking office…”Sky News
Last week, the Independent broke the news that Akshata Murty, the chancellor’s wife, was a “non-dom.”
Being non-domiciled is a tax status that dates back to the French revolution, over 200 years ago.
It’s a provision in law that means a person only pays tax on income earned in the UK, because they declare that their “primary connection” – broadly speaking, their permanent home – is outside the country.
In Akshata Murty’s case, that was India, and it meant she wasn’t liable to pay any tax on the £11.6 million in dividends she received in the past year from her shares in Indian IT company Infosys.
A firm founded by her billionaire father.
What she did was entirely legal, but it means she made a choice to avoid UK tax as a non-dom whilst her husband was chancellor… The man in charge of the country’s finances.
And the timing of the revelation wasn’t ideal either.
Because in his most recent economic update, the Spring Statement, Rishi Sunak was criticised for doing little to help families dealing with soaring energy bills whilst pressing ahead with the planned rise in National Insurance.
Something the Labour leader Keir Starmer used to highlight Rishi Sunak’s political problem.
“The chancellor has imposed tax rise after tax rise on working people and he said time and again there’s no alternative, we’ve got no option. If it now transpires that his wife has used schemes to reduce her own tax then that’s breathtaking hypocrisy.”Keir Starmer, 5 News
Although Labour hasn’t gone as far as to say whether it would abolish non-dom status altogether, which it promised to do in its 2019 election manifesto.
Under the tax rules, Akshata Murty had to pay £30,000 a year to the government and declare that another country, India, was her real domicile, and that she intended to return there.
That means that since Rishi Sunak became an MP in 2015, and then chancellor in 2020, his wife chose to avoid UK income tax, depriving the Treasury of around £4 million a year.
In response to the backlash caused by the revelation, Akshata Murty put out a statement saying that because of her Indian citizenship, she had no choice in the matter.
And the chancellor was quick to defend her, believing she was being used to attack him politically.
“The chancellor has told the Sun newspaper he believes his family are victims of a Labour smear campaign…”Good Morning Britain
He told the Sun that it wouldn’t be fair to ask his wife to sever her ties with India because of who she’s married to but that’s not what Akshata Murty would have to do.
She could pay taxes on international income in the UK and maintain her Indian connections because being domicile here for tax purposes has nothing to do with a person’s citizenship.
By the end of the week, Akshata Murty had u-turned on her non-dom tax status.
The chancellor’s wife announced she would pay UK tax on her earnings abroad.
In a statement, she said, quote, “it has become clear that many do not feel it is compatible with my husband’s role as chancellor”… continuing, “I do this because I want to, not because the rules require me to.”
And in an attempt to limit the political damage, Rishi Sunak wrote a letter to the prime minister asking for an investigation into his financial affairs to determine whether all his interests were “properly declared”.
“In his letter to the PM, Mr Sunak says this… “my overriding concern is the public retain confidence in the answers they are given and I believe the best way of achieving this is to ensure those answers are entirely independent without bias or favour…”Sky News
The chancellor asked to be referred to Lord Geidt, the independent adviser on minister’s interests, who has previously investigated Boris Johnson over the funding of renovations to his Downing Street flat.
“I’m aware and confident that such a review of my declarations will find all relevant information was appropriately declared.”Sky News
But the damage has been done.
As a result of the revelations, Rishi Sunak’s wife, Akshata Murty, will now pay more tax in the UK and her husband has paid a political price.
Just 10 weeks ago, Rishi Sunak was favourite to be the next prime minister. Now though, according to the influential Conservative Home website, he’s one of the least popular cabinet ministers.
Today’s story was written and produced by Imy Harper.
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