British Chancellor of the Exchequer Rishi Sunak and his wife Akshata Murthy attend a reception to celebrate the British Asian Trust, at The British Museum, in London on February 9, 2022. Sunak on Thursday faced awkward questions about his wife's finances after she confirmed she did not pay UK taxes on her foreign earnings on the same day he hiked taxes for millions of people. Image Credit: REUTERS

London: UK finance minister Rishi Sunak, once a leading contender to become prime minister, faced new criticism on Thursday after it emerged his Indian wife holds non-domiciled status, shielding her from UK taxes.

Akshata Murthy, daughter of Indian billionaire N. R. Narayana Murthy, confirmed she “is treated as non-domiciled for UK tax purposes” following a report by The Independent newspaper.

That means the multi-million-pound returns from her stake in family business Infosys over the past year were liable to be taxed outside Britain.

Sunak was already at a low ebb, his popularity plummeting as UK citizens tackle a cost-of-living crisis caused by surging inflation after the coronavirus pandemic and Russia’s invasion of Ukraine.

A recent YouGov poll showed his rating falling by 24 percentage points over the past two weeks, following a budget statement that was criticised for ignoring the plight of struggling Britons.

He also faced questions over his wife’s stake in Infosys after it emerged the IT giant was still doing business in Russia, despite the UK government’s sanctions on President Vladimir Putin’s regime.

The non-domicile tax status has been increasingly scrutinised in recent years as wealthy foreigners flocked to Britain.

Under British law, those with non-domiciled status are not liable to pay taxes on income earned abroad.

A person’s domicile is usually the country which their father considered his permanent home when the person was born, although this can change if the person plans to permanently live in Britain.

Scrutiny ‘unfair’

Murthy is legally entitled to claim the status, but it raises a political issue as she is ultimately declaring that the UK - the country in which her husband holds the second-most important political office - is not her permanent home.

She will be treated as UK-domiciled for tax purposes, and liable to be levied on foreign income, once she has lived in the UK for 15 years, in six years.

Sunak met Murthy while they were studying at Stanford University in California and they got married in India in 2009.

They moved to the UK four years later, shortly before Sunak became an MP.

A spokesperson for Murthy issued a statement saying she was “a citizen of India, the country of her birth and parents’ home”.

“She has always and will continue to pay UK taxes on all her UK income.”

Business Secretary Kwasi Kwarteng said the scrutiny of her finances was “completely unfair”.

But Labour shadow minister Ed Miliband told BBC television that Sunak needs to answer why “at a time when people are facing incredibly strained finances... we’ve got his immediate family sheltering a large part of their income from UK taxes”.

Fashion designer Murthy is reported to hold a 0.91 per cent stake in Infosys, which was founded by her father in 1981.