Non-dom status storm wobbles an already shaky Rishi Sunak

The non-domiciled tax status of his wife appears to have inflicted more harm on chancellor Rishi Sunak than this contractor-unfriendly Spring Statement 2022.

YouGov says that while Mr Sunak took a 10-point hit in the aftermath of his Blue Book, he has suffered 14-point drop since the outcry over Akshata Murty’s tax arrangements.

The polling organisation says that, for the first time, those scores makes HM Treasury’s boss as unpopular as Sir Keir Starmer, since he took office as Labour’s leader.

'The chancellor's wife has done nothing wrong'

But chartered tax advisers, including those who advise contractors, say that far from doing anything illegal, Ms Murty appears to have acted tax-efficiently.

“She’s done nothing wrong and is doing something eminently sensible that I would advise my non-domiciled clients to do,” posted private wealth adviser James Heathcote.

Chartered accountant Graham Douglas agreed: “Non domicile [status] does save tax, [so] good [for you] if you qualify for it.”

'Remittance basis'

At tax advisory Robertson Craig, senior manager Craig Rothnie explained: “Ms Murty has chosen to pay UK tax only on her UK income -- ‘the remittance basis,’ and not to pay tax on her worldwide income, as most other individuals that are resident in the UK do.

“She can make this choice as her domicile is outside the UK. Domicile itself is not a choice but is a question of fact…[and so ] this is not illegal, nor would I even suggest is tax avoidance, but simply making a choice based on UK tax law.”

Regarding Ms Murty’s status and actions similarly – as totally lawful -- is a former tax inspector, Carolyn Walsh, who today writes exclusively for ContractorUK; here.

'Non-doms make a positive contribution'

And more than merely being lawful, James Quarmby of law firm Stephenson Harwood has taken to LinkedIn to argue the status of the chancellor’s wife actually benefits the UK.

“It turns out that [Ms Murty], like 75,000 other foreigners here, is claiming non-dom status on her tax returns.

“Yet the non-dom regime has been in place since 1799…[and] the truth is that the regime actually makes a positive contribution to our public finances.”

Mr Quarmby continued: “The government’s own report in 2021 found that non-doms brought in just under £8billion of additional revenue per annum. To put that in perspective, the controversial NIC rise will only bring in £6m per annum. So, non-doms are extremely useful -- even those married to the chancellor.”

'Sense of fairness'

But despite the numerous shows of support by tax advisers, it seems the court of public opinion has now convinced the daughter of Infosys founder Narayana Murthy to change tack.

Ms Murty tweeted on Friday: “I understand and appreciate the British sense of fairness and I do not wish my tax status to be a distraction for my husband or to affect my family.

“For this reason, I will no longer be claiming the remittance basis for tax. This means I will now pay UK tax on an arising basis on all my worldwide income, including dividends and capital gains, wherever in the world that income arises. I do this because I want to, not because the rules require me to.”

'Less than favourable'

On behalf of the government in a Sky News interview yesterday morning, Kit Malthouse MP backed Ms Murty’s move, given he described her tax affairs to date as “less than favourable.”

Limited company lobby group Forgotten Ltd couldn’t agree more with the characterisation.

“[Ms Murty is] now agreeing to pay double-tax -- Indian and UK -- on her dividend income-- from her father’s business.

“She is quoted as saying that she recognises that the situation offends the British sense of fair play. She’s right. On steroids.”

'Using dividends to avoid paying a pint-of-beer-worth in tax'

Having tried to secure income support for PSCs during covid, the lobby group believes the idea that the couple at Number 11 didn’t know what each of them was up to is nonsense.

“The chancellor’s wife will [of course] have had…knowledge of what her husband was doing at work over the pandemic -- deciding not to support [limited company directors] because of…their using dividends to avoid paying about a pint-of-beer’s-worth of tax a week."

The group continued: “The one word that comes to us again and again is HYPOCRISY. How could a bloke with unimaginable wealth refuse parity of support to -- let’s not forget -- sub-£50,000 profit businesses?

“[The chancellor is guilty of] sentencing hundreds of thousands of business to closure and financial and mental health trauma to their owners. And all the time arranging his own tax affairs to minimise his payments and, no doubt, being fully cognisant of which boxes his wife was ticking to reduce hers.”

'Hypocrisy on an industrial scale'

The lobbyist also added it was “not illegal” to act as Mr Sunak and Ms Murty appear to have done, but it also said the chancellor ought to be charged with “hypocrisy on an industrial scale.”

It’s atrocious from a PR perspective,” wrote Mr Heathcote, a director at Knox House Trust UK, albeit before Mr Murty’s decision to no longer clam the remittance basis.

“HM Treasury must have known how it would play out if this information was discovered. The public, struggling to make ends meet, will be apoplectic.”

'Whopping'

Mr Rothnie, of Robertson Craig suggested Ms Murty’s move on Friday might have saved her husband from awkward Budgets to come.

“The main point for discussion [would have been] that as her husband, the chancellor of the exchequer [had] a direct interest in preserving the current remittance basis rules, particularly given the amount of UK tax at stake,” he said.

But the chancellor even getting to deliver another Budget  might be to underestimate the damage he has incurred since Spring Statement.

Even YouGov describes his 24-point poll plunge since then as “whopping.”

'Waiting for Sunak to go'

Richard Murphy, the tax campaigner, tweeted yesterday: “The only minister available to defend Rishi Sunak on television this morning was Kit Malthouse.

“That’s the C-team defence. The rest are just waiting for him to go.”

Downbeat about some limited companies remaining on the brink and others being left in the lurch, Forgotten Ltd cautioned: “The sad thing is that Rishi Sunal leaving the scene, as US pundits are forecasting will happen shortly, won’t help us at all.”

Last night, Mr Sunak wrote to Boris Johnson to ask that the PM’s independent adviser on ministers’ interests, Lord Geidt, review the declarations he has made since being appointed a minister in 2018, to decide whether his financial interests have been “properly declared.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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