Rishi's wife does not pay tax (millions!!) on dividends!

[FlowerArranger]

From today's Guardian :

Rishi Sunak’s multi-millionaire wife claims non-domicile status, it has emerged, which allows her to save millions of pounds in tax on dividends collected from her family’s IT business empire.

Akshata Murthy, who receives about £11.5m in annual dividends from her stake in the Indian IT services company Infosys, declares non-dom status, a scheme that allows people to avoid tax on foreign earnings.

www.theguardian.com/politics/2022/apr/06/rishi-sunaks-wife-claims-non-domicile-status?CMP=Share_AndroidApp_Other

Anyone as outraged by this as I am? I mean what the actual fuck?

[quote Chessie678]@SamphirethePogoingStickerist
That's exactly right. Something isn't a loophole if there's a box on your tax return to claim it and a specific charge to pay to opt in.

It's like companies claiming research and development relief or an individual getting a lower rate of inheritance tax because they have donated a certain portion of their estate to charity. There's no box on the tax return which says "please divert my income through the Cayman islands using a 12 step process and various trust structures" because it's not intended by parliament that you do that.

Non-dom status and the remittance basis is a very longstanding and intentional part of the tax system. It isn't something which Sunak or the Tories have just invented for their own benefit.

It remains because:

• overall it likely raises more tax revenue than it loses - although rich non-doms save tax by using the remittance basis if they didn't have this option a lot of them would ensure that they are not UK resident at all and therefore pay no / minimal UK tax;
• there are economic benefits to the UK in rich people living and spending money here;
• it helps attract foreign business people etc. to the UK e.g. the head of a large foreign tech company is headhunted to the UK. They have a significant stake in the foreign tech company which they get dividends from. Without the remittance basis they would have to pay UK tax on these foreign dividends (less any foreign tax already paid). They may well decide not to take the opportunity or to do so in a way where they don't become UK resident;
• there are compliance issues in terms of working out how much foreign income which never comes into the UK someone is actually making.

Fine to disagree with that rationale but that's why the system is as it is.

There's a question of fact as to whether Murthy actually legitimately has non-dom status here but people have explained upthread why that might be plausible (basically that changing domicile is quite difficult and doesn't necessarily depend on how much time you spend in the UK).[/quote]
An excellent explanation @Chessie678

But reason has gone out of the window unfortunately. Facts don't matter. It's populism (ironically unleashed by Sunak's party, and supported by him). The baying hounds will only be assauged by blood!

Oh yes, the "We want rich foreigners here spending money here" argument. Do we? Who asked us? Wealthy people putting the house prices up? I think they are contributing to having a more unequal society with a very wealthy tiny minority and the rest of us running around like rats and feeding on the crumbs they throw to us and we are just working to perpetuate their lifestyles.

@saleorbouy

What she's doing is not illegal, she will have to pay taxes somewhere and in this case it's inn India. I similarly lived in another European country while paying tax on my earnings in the U.K. not everyone's tax situation is so cut and dry especially if you work for a foreign company but live in another country.

Well no, not necessarily. We don't actually know whether it's India. Other options are potentially available, some of which are tax havens. People just seem to have assumed India as that's where she's from and previously lived.

Her residency looks pretty permanent don't you think

Yes, but the rules around being non dom include payents for living here for 20+ years. So there is no requirement for it to be temporary, if you agree to pay the fees set out by HMRC.

Many governments have had the chance to dismantle it, it's been here since 1799. But they don't, for very good reasons, we need, encourage, foreign investments, workers, etc. That's how London became the City it is, how the financial services sector contributed £164.8 billion to the UK economy in 2020.

@Chessie678 great explanation

I am curious generally here - are there ways in which overseas-earned dividends, that are not subject to UK tax because of non dom status, can be used to purchase assets or other things in the UK (e.g. property) and therefore miss being taxed in the UK as money being brought in?

A non story really.

That depends whether you think non-dom is a story or not. I know non-dom is a "standard practice" but when the Chancellor of the Exchequer's wife massively benefits from non-dom status, and the Chancellor of the Exchequer oversees the rules that make something standard practice, it is hard not to wonder if the continued availabilty of non-dom status is a personally neutral decision made purely for the good of the country.

There has been a gradual tightening up on non-dom status. You could also reasonably wonder whether a Chancellor whose wife wasn't using non-dom status might have tightened up more.

She is independent financially, of her husband

What does that really mean? I believe she is not dependent on her husband for money and that he does not force decisions on her. But that they do no joint financial planning, that they don't share resources or benefit from each other's wealth, and that he doesn't broadly know and agree with the decisions she makes? Yeah, right.

she is non domiciled as she has an Indian passport. India doesn't allow dual citizenship.

Tax status and citizenship are not the same thing. No-one has said she is obliged to pay tax in the country where she has citizenship, and many people don't.

You don't need to be born in a country or have citizenship of a country to have non-dom status in that country. You do need to have lived there but that could have been many years ago and you don't need to visit. But if their tax system saves you money, non-dom status means you can take advantage of it.

Anyone who thinks this is a non-story has confused their wishes with reality. You don't have to like something for it to be true...

Of course she doesn’t. Can afford to pay for the best tax dodging advice that doesn’t get her put in prison. She’s not alone, that’s how the rich stay rich. We see her unpaid tax as money that could support Social Care, schools, homeless people, better police training, more ambulances on the road, the list is endless. To a very wealthy person it’s their money, end of.

@Zonder

What do you mean *@tigger1001* ? She doesn't have to be non Dom, especially since UK is where she lived most of the time. That's the bit that makes it immoral for me.

If her domicile of origin hasn't changed she is still non domiciled.

I could move to France - would make me French resident but I still would be uk domiciled.

For her to have a domicile of choice Hmrc would look at:-
Her intentions
Her permanent residence
Her business interests
Social and family interests
Ownership of property
the form of any will she has made.

That's not an exhaustive list and no one criteria will determine if she has a domicile of choice. It's the overall picture.

It works in reverse too. Hmrc will(and have) try to prove that despite someone being non resident in the uk they still have a uk domicile.

No one on here knows what her domicile is for sure, other than she has said she is not domiciled here. But it's certainly not as easy as well she lives here so is uk domiciled.

@Skyellaskerry
Generally speaking, if a non-dom earns dividends overseas and then buys UK property with them they will be charged to UK tax on the amount used to purchase the UK property. There are a lot of complicated rules aimed at preventing tax avoidance here. Even if you take out a loan to buy UK property but pay off the loan using foreign income, that foreign income can become subject to UK tax, for example. HMRC really think a lot about how to counter tax avoidance and that is a large part of the reason that our tax system is complicated.

There is a concept of "clean capital" which is money which the non-dom earned before they became UK resident. The idea is that the UK should not have the right to tax something which was earned before a person had a connection to the UK. This clean capital can be brought to the UK or used to purchase UK property without incurring UK tax provided it is not mixed with foreign income earned while the non-dom is UK resident. So most remittance basis users will try to buy UK property from clean capital if they can.

@HardyBuckette we aren’t saying it isn’t true. But we don’t “not like it” she hasn’t done anything illegal and she’s not the only intelligent person who knows her way around tax either.

@HardyBuckette

Anyone who thinks this is a non-story has confused their wishes with reality. You don't have to like something for it to be true...

It's not precisely a non story. But it is the wrong story.

[quote RussianSpy101]@HardyBuckette we aren’t saying it isn’t true. But we don’t “not like it” she hasn’t done anything illegal and she’s not the only intelligent person who knows her way around tax either.[/quote]
Anyone who's saying this is a non-issue is in fact saying something that isn't true. It quite clearly is a very significant issue.

What you're doing here is assuming that your views on the legitimacy of what Murthy is doing are relevant to whether this is a non-issue or not. They aren't. A person could think she's 100% in the right and still understand this.

It's not precisely a non story. But it is the wrong story.

Which is a different argument.

It needs reiterating: we don't know that she pays tax in India because she and Rishi are being evasive about where their money is held.

As for the accusations that she is being singled out, there are loads of books and news stories and documentaries about the rich and their tax arrangements out there. Bankers who get their bonuses in furs and wines, footballers who receive their wages in non-repayable loans from offshore companies, businessmen who claim their multi-million pound company is actually owned by their wife who lives in Monaco, television presenters who claim they are a company and not a self-employed person. It's Rishi's turn for scrutiny because he's the Chancellor of the bloody Exchequer.

@EsmaCannonball I find all the, 'Oh well, wouldn't everyone use loopholes to pay less tax if they could? Anyone who doesn't is an idiot,' arguments disingenuous. Most people are excluded from having the option of 'tax management,' and if a care assistant or a teaching assistant somehow managed to avoid a bit of tax that money might mean he or she can top up the gas meter or avoid the rent bailiffs. If the Sunaks didn't avoid tax what would they have to go without? What material difference would it make to them?

Also, this sweeping statement that anyone who could would pay less tax can't be applied to everyone, surely. I believe that many people accept paying their due taxes because it is the fair and right thing to do in a society. But I agree that many of course do whatever they can to avoid paying as much as they can. Problem is the existence of legal methods to reduce what you pay in tax if you are in a position to do so, especially in the current climate. It's absolutely not fair that those who pay their due tax & NI taken out from their wages could be paying proportionately higher tax that the person that can find ways to 'tax plan'.

@SamphirethePogoingStickerist it’s interesting that you seem to think there hasn’t been interest and awareness generally in this previously, one of the reasons I say they’ve been daft from a PR pov is this is a known contentious issue. Pretty easily avoided by declaring it scrupulously which I believe he failed to do, or not taking advantage of it for the duration of his parliamentary career.

I agree that the current interest is likely a tool for smearing although I wouldn’t point the finger at Starmer, BJ still has party gate rumbling in the background along with consequences of Brexit coming to the foreground, financial entanglement with Russian oligarchs, etc. Sunak is the strongest candidate to replace him… it was an easy punch considering that it’s already a point of contention. Media attention is just providing a lot of people with forum to hold discussions they have been trying to have for a some time. Imho it’s a risky move since some people will just add this to growing list of other grievances with this current cabinet but I can see the advantage of making a direct threat to a competitors chance of taking BJ’s position within the party may tip the balance that makes it worth the risk.

I’m also unsure why you’d hold up other tax rules as evidence of why this is all fine. We’re all focussed on one element yes, but more widely there are clearly legal, but immoral or unfair, issues that would benefit from the same public scrutiny. We do not have a ‘fair’ system and we are also not Monaco. I question exactly how much money these policies actually benefit the average tax payer by topping up the treasury. We’re sold the line that these rules create wealth for the UK, but then we were told Brexit would be a wealth creator… I presume that it’d be shouted from the rooftops if it was a success from the electorates perspective but it’s not. Why’s that?

@Chessie678 thanks for taking the time to reply!

So while Rishi was Chancellor both him and his wife were 'permanent US citizens' Both were paying taxes to the US. How can anyone resident in this country and paying taxes support this? www.independent.co.uk/news/uk/politics/rishi-sunak-tax-wife-us-resident-green-card-b2053783.html

Yes, I don't think Starmer is the most obvious candidate here. It's possible, but looking at the people with the most to gain from this blowing up now, it's the other potential leadership candidates if Johnson goes.

@HardyBuckette

It's not precisely a non story. But it is the wrong story.

Which is a different argument.

And the only one I have been making.

What Murty as an individual, the daughter of the Indian "father of IT", billionaire, with family monies to protect does to protect her money is her business, as long as it remains legal. Which, as far as we know today, it is (HMRC might disagree at some future date). I saulte her. She has the money her parent's earned, are still earning, her potential inheritance as well as her current stake (which is a tiny % apparently) separated from her marriage. Good for her!

That she is also truly bloody wealthy here in the UK, with her UK business is also good for her. And separate from her husband over and above it having been part of his legal requirement for disclosure.

What the many uber rich career politicians in the UK do is my longstanding bugbear. More that they are careerists than rich, but that only adds to the disconnect.

Individuals being as rich as Croesus is one thing. But when all of our politicians are, or all those in the Cabinet and Shadow Cabinet, then we have a major problem, one we have long lived with, unfortunately.

[quote Cornettoninja]@SamphirethePogoingStickerist it’s interesting that you seem to think there hasn’t been interest and awareness generally in this previously, one of the reasons I say they’ve been daft from a PR pov is this is a known contentious issue. Pretty easily avoided by declaring it scrupulously which I believe he failed to do, or not taking advantage of it for the duration of his parliamentary career.

I agree that the current interest is likely a tool for smearing although I wouldn’t point the finger at Starmer, BJ still has party gate rumbling in the background along with consequences of Brexit coming to the foreground, financial entanglement with Russian oligarchs, etc. Sunak is the strongest candidate to replace him… it was an easy punch considering that it’s already a point of contention. Media attention is just providing a lot of people with forum to hold discussions they have been trying to have for a some time. Imho it’s a risky move since some people will just add this to growing list of other grievances with this current cabinet but I can see the advantage of making a direct threat to a competitors chance of taking BJ’s position within the party may tip the balance that makes it worth the risk.

I’m also unsure why you’d hold up other tax rules as evidence of why this is all fine. We’re all focussed on one element yes, but more widely there are clearly legal, but immoral or unfair, issues that would benefit from the same public scrutiny. We do not have a ‘fair’ system and we are also not Monaco. I question exactly how much money these policies actually benefit the average tax payer by topping up the treasury. We’re sold the line that these rules create wealth for the UK, but then we were told Brexit would be a wealth creator… I presume that it’d be shouted from the rooftops if it was a success from the electorates perspective but it’s not. Why’s that?[/quote]
I'm not sure I've said any of that, have I?

I've just focussd more on him, and other politicians rather than their spouses.

And I haven't held up other tax rules as evidence of why this is all fine. It isn't fine, none of it is fine. It is all the basis of indifference at bets, corruption at worst. I am decrying a wider issues, based in the personal wealth of those who run the country.

Akshata Murthy is neither here nor there, in the grand scheme of things. The ever increasing disparity in economic equality is the issue.

[quote Chessie678]@Skyellaskerry
Generally speaking, if a non-dom earns dividends overseas and then buys UK property with them they will be charged to UK tax on the amount used to purchase the UK property. There are a lot of complicated rules aimed at preventing tax avoidance here. Even if you take out a loan to buy UK property but pay off the loan using foreign income, that foreign income can become subject to UK tax, for example. HMRC really think a lot about how to counter tax avoidance and that is a large part of the reason that our tax system is complicated.

There is a concept of "clean capital" which is money which the non-dom earned before they became UK resident. The idea is that the UK should not have the right to tax something which was earned before a person had a connection to the UK. This clean capital can be brought to the UK or used to purchase UK property without incurring UK tax provided it is not mixed with foreign income earned while the non-dom is UK resident. So most remittance basis users will try to buy UK property from clean capital if they can.[/quote]
Thanks for your really helpful explanations @Chessie678 - definitely the best part of this thread!

This discussion reminds me the the populism of brexit.

Just like with EU membership, we have a long-standing, rational, well-thought-through, tedious, dull and complex system which is beyond the comprehension of most people. Some devious people (in this case the Tory competitors of Sunak) take advantage of the complexity, play people like fiddles, and whip up a lot of hysteria to achieve their aims.

I'm not sure which and how many posters have used the 'non-story' term samphire and cba to look back over the thread. If you haven't, then I'm not referring to you, and if you have then the argument that this the wrong story rather than a non-story is not the only one you've been making.