Rishi Sunak’s position was under increasing threat after Boris Johnson said he was unaware the chancellor’s wife was a “non-dom” and fresh questions emerged over the couple’s tax affairs.
Sunak was on Friday forced to confirm he had a US green card– meaning he had declared himself a “permanent US resident” for tax purposes for 19 months while he was chancellor. A source close to the couple also confirmed that his wife, Akshata Murty, held a green card as well.
The disclosure appears at odds with Sunak’s defense of his wife being a non-dom – he said she intended to return one day to live in India.
The status could have helped her legally avoid an estimated £20m of UK tax on foreign earnings from her billionaire father’s Indian IT company.
The Guardian has also discovered the Treasury last week brought in a new low tax scheme that is partly designed to benefit some wealthy non-dom investors – just days before Sunak’s national insurance rise hit millions of working people at the height of a cost of living crisis.
The new laws specifically mention fund manager non-doms as a category of people who can benefit by not having to pay tax on foreign earnings through the new vehicles.
The Treasury had previously claimed Sunak had made no changes to non-dom policy since 2017, raising new questions about whether the Treasury was fully informed about Sunak’s family’s tax arrangements when formulating policy.
In a press conference on Friday, Johnson admitted he had not been told about Murty’s non-dom status. But he denied anyone at No10 was briefing against the Sunaks, and praised the chancellor for doing an “outstanding job”.
However, Downing Street insiders revealed that an away day this week descended into acrimony between No 10 and No 11 aides, over the source of the Murty leak and longstanding tensions over the partygate scandal.
Tory MPs said they believed it was possible Johnson could seek to move Sunak from the Treasury in a summer or autumn reshuffle if he survives the current crisis threatening his chancellorship.
The revelations have prompted a political outcry over Sunak’s lack of transparency about his wife’s financial affairs, with the chancellor still refusing to deny that Murty may collect her dividends in a tax haven and therefore pay no tax at all on some £54m in payouts over the past seven-and-a-half years.
Murty’s non-dom status could also allow her family to legally avoid an inheritance tax bill of more than £275m.
UK taxpayers are required to pay a 40% take on inheritance (above £325,000), while non-doms are except from the tax. Murty has assets of at least £690m held in Infosys shares, tax charged on this at a rate of 40% would be £276m. Murty and Sunak also own four properties worth more than £15m in total, and she also holds substantial investments in other companies.
The Liberal Democrat leader, Ed Davey, called for an urgent investigation into the green card status, saying it could be a “serious breach of the ministerial code”, while Keir Starmer, the Labor leader, called for the chancellor to “come clean” on Murty’s tax affairs.
It is understood Sunak and Murty, who own a £5.5m Californian penthouse holiday home, have donated $3m (£2.3m) to a US university in recent years.
The chancellor’s spokeswoman insisted that under US law “you are not presumed to be a US resident just by dint of holding a green card”.
She said Sunak followed all guidance and continued to file US tax returns, but specifically as a non-resident, in full compliance with the law.
“As required under US law and as advised, I have continued to use his green card for travel purposes. Upon his first trip to the US in a government capacity as chancellor, he discussed the appropriate course of action with the US authorities. At that point it was considered best to return his green card from him, which he did immediately.
“All laws and rules have been followed and full taxes have been paid where required in the duration he held his green card.”
Holders of green cards are required to pay US tax on their worldwide income – and also to make a legal commitment to “make the US your permanent home”.
They are required to file annual US tax returns, and are “responsible for reporting your income and paying taxes on any foreign earned income”. This raises the suggestion that Sunak may have been required to pay US tax on his publicly funded MP’s salary.
On Thursday, Sunak defended Murty’s decision to claim non-dom status, which allows her to avoid UK tax on her foreign earnings, because she intended one day to return to live in India.
Under non-dom rules, Murty does not legally have to pay tax in the UK on the estimated £11.5m in annual dividends she collects from her stake in Infosys, her billionaire father’s IT business. UK tax residents would be expected to pay about £4.5m in tax on the dividend payment.
The non-dom status may have allowed her to avoid up to £20m in UK tax. Murty has said she pays tax on the dividends overseas, but has refused to state how much she pays or in which country. She has previously collected other shareholder income via the tax haven of Mauritius, which does not tax dividends.
Davey has written to Simon Case, the cabinet secretary, and Lord Geidt, the independent adviser on ministers’ interests, demanding an urgent inquiry. His letter from him said: “How could the man who is responsible for UK tax policy regard any permanent residence status for the United States as acceptable? This would be a huge conflict of interest – and a serious breach of the ministerial code.”
Sunak earlier told the Sun that Murty “loves her country like I love mine”, and said she had always been domiciled in India. He said she was entitled to use the non-dom arrangement as she was an Indian citizen and planned to move back to her home country to care for her parents de ella.
Under non-dom rules, Murty pays £30,000 a year for the right not to pay UK tax on her overseas income. The status will automatically cease once she has resided in Britain for 15 years, a milestone it is understood she will reach in 2028.
Sunak insisted that Murty pays all taxes due in the UK, “and every penny that she earns internationally, for example in India, she would pay the full taxes on that”.
George is Digismak’s reported cum editor with 13 years of experience in Journalism