Explained: The UK Tax Row Involving FM Rishi Sunak's Wife Akshata Murthy, And How Infosys Is Linked

UK Tax Row: Due to her non-domicile status, Akshata Murthy, it has been reported, is likely to have avoided millions of pounds in UK tax.

Chancellor of the Exchequer Rishi Sunak alongside his wife Akshata Murthy (Getty Images)

New Delhi: Controversy has erupted in the United Kingdom over the non-domicile status of Akshata Murthy, the daughter of Infosys co-founder Narayana Murthy and wife of British finance minister Rishi Sunak.

Due to her non-domicile status, Akshata Murthy, it has been reported, is likely to have avoided millions of pounds in UK tax.

The controversy comes even as FM Rishi Sunak faces criticism for raising the tax burden on UK taxpayers to its highest level since the 1940s, The Guardian reported.

• What Does Non-Domicile Status Mean?

In the United Kingdom, a non-domicile status is a scheme that allows people to avoid tax on foreign earnings. "UK residents who have their permanent home (domicile) outside the UK may not have to pay UK tax on foreign income," the UK government website says. However, they have to pay tax on money earned within the UK.

• What Is The Controversy Surrounding Akshata Murthy? How Is Infosys Linked?

Akshata Murthy owns a 0.93 per cent stake in IT services company Infosys, which is worth approximately £690 million (Rs 68,56,36,11,231). Murty receives about £11.5 million in annual dividends from her stake in Infosys, a report in The Guardian said.

Now, as per UK tax laws, since Murthy has claimed non-domicile status, she would not have had to pay tax on the dividend payment from Infosys. The company has its headquarters in Bengaluru and is listed on the Indian and New York stock exchanges.

READ | UK’s Indian-Origin Minister Rishi Sunak In Dock Over Wife’s Infosys Link With Russia

If she did not claim that status, she would have had to pay £4.4 million (Rs 43,72,76,136) to HM Revenue and Customs, the UK government department responsible for the collection of taxes. UK resident taxpayers pay 39.35 per cent tax on dividend payouts.
 
It has come to light that Murthy has kept the non-domicile status despite living in 11 Downing Street with Rishi Sunak and their two daughters.

Murthy has been living in the UK for nine years, The Daily Mail reported. The couple met at university in California and got married in 2009.

In 2015, the UK government brought in reforms that said non-domicile status was intended to "support those from overseas who come to the UK but don't intend to stay here permanently".

When Rishi Sunak was made a minister in 2018, he is said to have declared his wife's tax status. He had also made the Treasury "aware, so as to manage any potential conflicts", The Daily Mail report said.

• How Has Akshata Murthy Reacted? What Have UK Politicians Said?

A spokesperson for Akshata Murthy has said she is an Indian citizen and pays UK taxes on UK income. There is no suggestion any laws or rules have been broken, the spokesperson said.

"Akshata Murty is a citizen of India, the country of her birth and parents’ home. India does not allow its citizens to hold the citizenship of another country simultaneously. So, 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," the spokesperson said.

Tulip Siddiq, the shadow economic secretary to the Treasury, said it was staggering that Sunak's family was benefiting from tax reduction schemes while he had imposed "tax hike after tax hike on the British people".

"Rishi Sunak must now urgently explain how much he and his family have saved on their own tax bill at the same time he was putting taxes up for millions of working families and choosing to leave them £2,620 a year worse off," The Guardian quoted Siddiq as saying.