UK government under attack for no-dom regime
Advocates of the non-dom regime say these wealthy people are still taxed on certain UK-based activities. They will have to pay inheritance tax on UK assets, for example. In recent years, governments have tightened the non-dom regime, ending people’s ability to enjoy this status permanently.
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Britain’s finance minister, aka Chancellor of the Exchequer, Rishi Sunak, is facing political heat after it emerged his wife had non-domiciled status for tax purposes.
This status means that Akshata Murty does not have to pay UK tax on income earned overseas. Murty is making money from the shares of an Indian software giant founded by his billionaire father, as noted by the media. Her spokeswoman said she was paying all taxes due in the UK (source: BBCApril 7).
Advocates of the non-dom regime say these wealthy people are still taxed on certain UK-based activities. They will have to pay inheritance tax on UK assets, for example. In recent years, governments have tightened the non-dom regime, ending people’s ability to enjoy this status permanently. Criticism of the regime intensified after the financial crash of 2008 and as hostile coverage of offshore financial centers grew.
The opposition Labor Party has called for “full transparency” on the issue.
A tax and labor figure for private clients was unimpressed with the political noise about Sunak’s wife and her arrangements.
“I guess it’s still the same old. The law is the law and the chancellor’s wife is free to make the most of the UK system,” said Miles Dean, head of international tax at Andersen in the UK. .
“This story proves the paucity of political argument in the UK. If Labor is so concerned about the benefits given to non-doms (which are plentiful around the world), they must make the abolition of non-dom status part of their forthcoming manifesto.. Choosing a woman, who happens to be the Chancellor’s wife (whose tax affairs we know very little about), for political capital is, I’m afraid, over the course and what we expect,” Dean said.
The question is awkward for Sunak who has been touted as a potential future Prime Minister if or when Boris Johnson leaves 10 Downing Street. Sunak has raised taxes such as National Insurance contributions – a payroll tax – to the fury of some of his own Tory colleagues. The government has raised taxes to the highest level in around 70 years, citing the cost of paying for health care and social care for the elderly as the reason. The COVID-19 pandemic and the layoffs of millions of employees have hit public coffers.
People can get non-dom status if they live in the UK but intend to return to their home country. Murty is an Indian citizen and has retained family ties to India. A report (BBC) says Murty said she would like to go back. She automatically loses her non-dom status if she has lived in the UK for 15 years.
The issue, however, is that while the “optics” of a chancellor’s wife using non-dom status may be politically flawed, the non-dom regime – used for centuries – is the law of the land, and that lawmakers can change if they want to, and have done so. (Editor’s comment: The question also begs the question of whether the financial, and entirely legal, activities of a politician’s spouse are legitimate areas of media/public or private interest.)
“Akshata Murty, the daughter of an Indian billionaire, has simply chosen to be taxed on the basis of remittances as a non-domiciled natural person. As only around 75,000 people claim non-UK domicile status on their tax returns each year, it is understandable that details of the remittance basis are not widely known,” said Dhana Sabanathan, partner at Winckworth Sherwood.
“It is not surprising that there is confusion over the notion of domicile, which is not defined by law. Instead, one must rely on case law (common law) for interpretation. There have been a number of domicile cases over the past hundred years. It is perhaps appropriate that a concept introduced in 1799 to protect British colonial interests in India is now used by wealthy Indians in the UK. In broad terms, a person’s home is where they consider their permanent residence (even if it is not their current residence) and where they continue to have strong personal, cultural and economic ties.” continued Sabanathan.
“Unfortunately, even Ms Murty’s own spokesperson appears to have been a bit confused when he issued a statement as to why her client is relying on her non-UK home. The statement said that ‘India does not allow not its citizens to simultaneously hold the citizenship of another country”. Thus, under UK law, Ms Murty is considered not to be domiciled for tax purposes in the UK. As has been widely pointed out, nationality is not not definitive when it comes to determining domicile,” Sabanathan said. “Furthermore, Ms Murty does not automatically benefit from her non-UK domicile status; she must claim it annually on her self-assessment tax returns Assuming Ms Murty has been resident in the UK for at least seven years, she now pays an annual fee (currently £30,000, rising to £60,000 after 12 years of residence), to continue claiming the basis of payment.
Sabanathan added that the number of people claiming the remittance basis has fallen in recent years, after a time limit was introduced to be able to claim within the first 15 years (out of the previous 20 tax years) of UK tax residence. United. If she were to leave the UK, she would be expected to leave with her family. As the Chancellor has been discussed as a potential future candidate for the post of Prime Minister, the idea that he might not reside in the UK for the long term has taken many by surprise.