New Delhi: A recent report has revealed that Akshata Murthy, the Indian wife of British Finance Minister Rishi Sunak and daughter of Infosys founder NR Narayana Murthy, is richer than Queen Elizabeth I. Murthy is not liable for UK tax on income earned abroad due to non-DOM status.
Sunak’s popularity has waned due to soaring consumer prices amid recent reports that Murthy’s overseas earnings have been shielded from British tax authorities.
Read also: Rise in food prices pushed inflation to 16-month high in March, says report
According to news agency PTI, Murthy earns £11.5 million in annual dividends from his stake in his father’s IT business, which is based in India. But his non-DOM status means he is not liable for UK tax on income earned abroad. According to the BBC report, it would not have paid UK tax on the dividend at the rate of 39.35 per cent.
As PTI reports, a person earning that much in the UK without non-Dome status would, last year, pay around £5 million in UK income tax, plus another £250,000 in national insurance contributions. In fact, it would have increased her husband’s home national insurance cost by an additional £150,000 or more if he had not declared himself non-dom.
What is non-domicile status?
Non-domicile, or non-dom, is a British tax status that has been available since the French Revolution. This means a person who was born in another country, or if their parents are from another country, would be allowed to pay tax in the UK only on their UK income, the report said.
Under government regulations, people may be granted non-dom status, meaning the UK is not considered their permanent home if they reside in the country but intend to return to their home country.
Reformed in 2015, the system became more complex. Non-DOM is limited to 15 years. The reforms have effectively reduced the number of people claiming non-DOM status. Now, only the very rich can take advantage of it. Many move out of the UK after age 15 for five years, and then return and claim 15 years of non-dom.
How does it benefit British citizens and foreigners?
Reportedly, the regime has sometimes been abused by foreigners, or British citizens, to avoid paying taxes entirely. In theory, they are required to pay taxes in the countries where the income is earned, the fact that they live in the UK (and are tax residents) makes their affairs easier to settle and ultimately much more Pays little or no tax.
It has been observed that many of the wealthiest families living in the UK are not contributing to direct taxation in the UK.
However, it is claimed that the system is still useful because these people contribute indirectly, maintaining a small army of servants and service providers, who themselves pay income tax. Non-domes can also pay VAT on expensive goods and services in the UK.
What happened in the case of Akshata Murthy?
A statement by Murthy’s spokesperson said that being an Indian citizen helped him achieve non-Dom status. Akshata Murthy is a citizen of India, the country of her birth and the home of her parents. India does not allow its citizens to simultaneously hold the citizenship of another country. According to British law, the statue is considered a non-resident for UK tax purposes. The report mentions that she has always continued to pay UK taxes on all her UK income.
She is a tax resident in the UK as she lives there. The fact that he is an Indian citizen is not relevant – non-DOM status is an option.
Sunak supported this view, responding to The Sun: “That’s her family … That’s where, you know, she’ll eventually want to take care of her parents when they grow up.”
Having lived in the UK for seven of the previous nine tax years, he would have to pay a fee of £30,000 to maintain non-dom status (as Murthy does). After 12 of the last 14 tax years, the fee is £60,000. And once someone has lived in the UK for 15 years, they are automatically domiciled. Murthy is said to have moved to the UK in 2015.