Tax experts have criticised the “disingenuous” explanation given by the wife of chancellor Rishi Sunak for claiming non-dom status.
Akshata Murty, who married Sunak in 2009, owns a stake in Indian technology company Infosys, founded by her father, that is thought to be worth more than £500mn.
Her spokesperson confirmed on Thursday that she holds non-domiciled status in the UK, which allows her to earn money abroad without paying tax in Britain for a period of up to 15 years.
The dispute comes after Sunak’s political standing tumbled following the Spring Statement. According to ConservativeHome, a grassroots party website, the chancellor has become one of the least popular members of the cabinet.
Allies of Sunak suggested that the attacks on his wife were politically motivated. One MP close to the chancellor said: “This is really about Rishi, not his wife. She can speak about her own business arrangements and shouldn’t be fair game.”
One friend of Murty said she was a “private citizen” and said it was “harsh [that] she should be the collateral for politically inspired attacks on her husband”.
Arun Advani, an assistant professor at the University of Warwick, who recently published research on the UK’s non-dom population, said Murty’s statement that she had to be a non-dom because of her Indian citizenship seemed “disingenuous”.
He said on Twitter: “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).”
Murty’s spokesperson said that, as a citizen of India, she was unable to hold citizenship of another country, after the story about her tax status was first reported in the Independent.
“According to British law, Ms Murty is treated as non-domiciled for UK tax purposes. She has always and will continue to pay UK taxes on all her UK income,” they said.
The statement suggested that Murty did not have a choice in her non-dom status, which is incorrect, according to tax experts. Under the UK tax rules, even if she is considered to be non-domiciled based on her connections to India, she would have actively had to claim the status by ticking a box on her tax return and paying a fee.
“It implied she was forced to be non-domiciled. That is a total nonsense,” said a partner in an accountancy firm and non-dom status specialist.
As well as allowing Murty to legitimately not pay tax on income earned overseas, her non-dom status also exempted her from paying UK inheritance tax on any assets held in India, the adviser said.
This would remain the case even after Murty had been deemed to be domiciled in the UK after 15 years of residency. The tax benefit arises due to a quirk of Britain’s inheritance tax treaty with India.
Dan Neidle, a senior tax lawyer, agreed the statement was “misleading”. But he said he would not describe claiming non-dom status as tax avoidance as it was simply making use of the government’s rules. However, he said the revelation about Murty raised questions about the chancellor having a “conflict of interest”.
There were valid reasons to look at whether the non-dom regime was justifiable, particularly for wealthy people such as Murty, Neidle added. “The problem is the person who decides if that’s how the rules should be is her husband,” he said.
Meanwhile, Labour leader Sir Keir Starmer attacked Sunak for what he called “breathtaking hypocrisy”, adding: “The chancellor has imposed tax rise after tax rise on working people and he’s said time and again there’s no alternative.”
Kwasi Kwarteng, business secretary, defended the chancellor and his wife on Thursday, saying that Sunak had been clear that he “comes from a very affluent family” but added it was “completely wrong” to suggest there had been any wrongdoing.
Prime Minister Boris Johnson refused to comment on the revelation when asked about it on Thursday, saying only that it was important to keep families out of politics “if you possibly can”.
Treasury insiders said that Sunak had declared his wife’s tax status to the Cabinet Office when he was first appointed as a government minister in 2018. The Treasury was also aware of her tax status.
Some tax experts also questioned the appropriateness of criticism directed toward the chancellor, for his wife’s tax arrangements.
“We have independent taxation of husbands and wives quite deliberately,” said Mike Hodges, partner at Saffery Champness, an accountancy firm. “To what extent are we holding [the chancellor] responsible for his wife’s taxation?”
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