Andhra Pradesh says:
April 7 2022 at 8:57 am
Dear Richard“The first thing to note about non-domiciled status is that it is given to no one if they do not apply for it.”
“the claim to be non-domiciled is one she has made by choice”
I am afraid these statements are factually wrong.
A person acquires their domicile at birth. Given that Ms Murthy was born in India of Indian parents and holds an Indian passport it’s indisputable that she had Indian domicile at birth. She doesn’t have to apply for this. She has to state what her domicile is in her tax return if this is relevant to her tax affairs Which it obviously is. But she does not ‘apply’ for Indian domicile. It’s a question of fact.
It is (as many tax cases have shown) difficult to show that your domicile has changed – for obvious reasons as if it were easy, many UK domiciled individuals could claim to have changed their UK domicile and escape UK tax consequences.
Am I right in thinking that she would have paid dividends tax on those dividends to the Indian government?
Headline in every* media outlet and blog post this morning: “Labour demands tax due to Indian State be appropriated for UK HMRC instead.”
Sounds very Imperial Little-Englander to me. And racist, obvs.
*It isn’t? Surely shome mistake.
Sean O’Connor said:
“Am I right in thinking that she would have paid dividends tax on those dividends to the Indian government?”
Not sure. There’s a Non-Resident Indian tax status that gives you various exemptions there (basically I think you’re only taxed on Indian-source income). It would then depend on whether there’s some sort of offshore holding structure that would make the dividends become non-Indian. I don’t know whether that’s possible, or if it is whether it was done, but it would need someone with a good understanding of Indian tax to be definite about whether it was actually taxable there.
It’s not difficult. The effort to establish my non-domicile status consisted of a letter to HMRC stating on the life of my firstborn male child I wasn’t returning for the foreseeable future, with a copy of foreign passport, and a letter back.
As I’m not resident or ordinarily resident it doesn’t make much difference. I only did it to stop being sent demands to fill in UK tax returns for the (at the time) 6p annnual interest on a bank account. The German ones are headache enough.
To my utter astonishment, it rather looks as though Andrew C’s chum hasn’t managed to get his message across. (Cue distasteful fawning from Pilgrim Slight Retard).
Not sure about this. Open to correction, but I don’t think a UK tax return asks you what your domicile is. “Domicile” in the sense AP uses it is more a matter of wills, estates and inheritance tax. So “non-dom” is a bit of a misnomer. You can be a non-dom for taxes AND be UK domiciled for inheritance tax purposes, or not – it’s not relevant. When I returned to the UK after decades abroad I was non-dom for a couple of years, after which it was still a possibility, but with a much higher minimum tax applied. So then I stopped being a non-dom while continuing to be domiciled elsewhere for inheritance purposes.
Note the Indian status is Non-Resident Indian, NRI. So residence not domicile.
TBC I’m sure Spud is both wrong and unfair (haven’t read the post or comments – don’t need to). He always is. But I don’t think AP’s reply has it right either.
Napsjam, does anywhere except the UK even have the concept?
Live here, in the Fourth Reich, for at least 6 months and 1 day in any calendar year, and you are taxed on your worldwide income. Don’t live in the Fourth Reich for 6 months and a day and you are not taxed on anything. There is something analogous to “ordinarily resident” but it is more to do with where your main residence is if you have two or more residences within the Reich.
It must be actually quite easy to not have to pay income taxes anywhere by having 3 residences in 3 countries (or 2 in 2 countries and spending a couple of weeks on holiday somewhere else). How do tax offices stop that?
Ever the user of the ‘charm offensive’ tactic is Spud….
Richard Murphy says:
April 7 2022 at 10:02 am
You have to apply to HMRC for the status to be applied
She did not have to apply
So you are talking complete nonsense
And hundreds of thousands who could be non-doms do not apply
So you are talking straightforward nonsense
I am not discussing domicile. I am discussing applying to be non-dpom
I feel sorry for your clients if you do not understand that
So Murphy thinks she should pay more tax than is due, by being taxed under an incorrect domicile status?
RichardT – agreed.
And the utterly vile Prof seems to regard her as a “mere chattel” of her husband for the convenience that this might allow the UK to tax her. No wonder he leaves a trail of ex-wives behind him.
I do sometimes find myself wondering where Murphy’s brain is domiciled!
@Napsjam “Open to correction, but I don’t think a UK tax return asks you what your domicile is.”
In the “Residence, remittance basis etc” pages. Q23. Requires a tick if you are are domiciled outside the UK for tax.
@Andrew C, correct, it is a claim. Ms.Murthy did not have to tick the box. She could have chosen to file a tax return without ticking the box and paid tax on her worldwide income with double tax relief where she paid Indian tax.
I suppose the question is, would her tax be:
1. More overall
2. More to India / Less to UK
3. More to UK / Less to India
4. The same, regardless
Not sure I can claim to predict the answer on this one.
I put this on the other thread for Andrew C etc to opine upon
“HMRC have been able for about 5 years to override common law status of non-domiciled on the basis of continued residence. It is much harder to claim non-Dom status. And if you do claim remittance status, then you are still liable to pay 30k or 60k, depending on length of residence”
@John Galt, I can’t answer without detailed information about her tax affairs, but it is likely that she would pay more tax in the UK, as if the additional UK tax exceeded the £30k/£60k charge she would not be claiming non domicile status. She would not pay less tax in India.
@Sam Jones: Yes, that was my understanding as well, in essence she pays £30,000 to avoid a higher tax bill either here or in India.
So why do we live with this pretence of “domicile” exactly? If it’s to attract foreigners who would otherwise go elsewhere then fair enough, but this is the wife of the UK Treasury Minister who has just raised tax to eye watering levels, yet his wife is legally avoiding taxes that would otherwise be due to any other legal resident of the UK because of what, exactly?
Some Victorian concept that has no meaning in the real world?
Now I understand that there are reasons why we might want to retain the concept of domicile, since it allows us to pick the pockets of the dead where they are no longer resident in the UK, but remain UK domiciled for inheritance tax, but you’ve got to admit that the optics are bad.
Very bad indeed.
But on what basis can Mrs Sunak avoid the claim of deemed uk domicile?
Because she is a foreigner, born in foreign and tax rules allow her to would seem to be the essence.
That she is both resident and permanently settled in the UK seems to be irrelevant to the argument. Not that I am in favour of “MOAR TAX!” ala the Spudlicious Sage of Ely, but I do think that there’s a point that once you become a UK resident then you should suffer the same tax rules as the rest of us plebs.
Equally, if you are born and bred in the sceptred isle and decide to flee the realm to some sun drenched islands where there is no inheritance tax to bide your time until DEATH (anthropomorphic or otherwise) takes you, then HMRC should have no claim on what remains of your estates and wealth.
Residence should be the be-all and end-all of taxation and if the tax levels are too high, voting with your feet by relocating (lock, stock and barrel) to some Caribbean tax haven should mean an end to UK tax obligations from the day you leave (with the exception of outstanding taxes, penalties and interest. Can’t give free license to actual tax evaders).
John Galt, did you not read my precis of UK tax law? Your opinions do not appear to take the law into account
does anywhere except the UK even have the concept?
New Zealand does. If you live more than a certain period in NZ you are deemed a resident and taxed accordingly. But just because you are under that period doesn’t mean you are safe.
When my wife and I moved overseas we were advised, by a professional, to not rent our house out furnished or give any indication that our trip was anything but permanent. The NZ Inland Revenue are quite capable of having people living most of the year outside NZ deemed to be resident if they are only doing so to game tax.
Likewise my sister, who resides overseas, has a house in NZ. But they do not rent the house out, as they want no indication that they are conducting any business in NZ.
The remittance basis charge – £30k or 60k depending on +6 or +12 years UK residence – does not over-ride a person’s domicile. Indeed it accepts that someone IS non-dom and is the charge for allowing a non-dom to continue to claim the remittance basis of tax after a lengthy period of residence in the UK.
The non-dom tax rules arose in part at least to encourage foreigners to come to the UK. If they had business interests abroad, those businesses would continue to be taxed where they were provided their owners did not bring the profits to the UK to spend. Why not? If businesses have to pay tax to support the infrastructure that supports them, why should the UK exchequer benefit when it has provided none of that support?
We did, after all, have an empire at the time the rules developed and plenty of overseas business owners who wanted to come to the UK.
Meanwhile the rules are the rules. Did you know that – strictly according to the rules – you have to CLAIM private residence relief to avoid CGT on the sale of your home? How many criticising the chancellor’s wife would NOT make this claim and pay CGT? If you would claim and are still critical, explain the difference.
Unless you’ve written that somewhere else, I guess I am missing your point.
My point is not the Ms Murthy is not following the law as it stands. I am absolutely positive that she is and will have had probably had specific international tax advice on that matter.
My point is that we shouldn’t have, essentially, one set of very generous tax laws for wealthy foreigners and another set of tax laws for everybody else.
I’m sure there are quite a few UK born and bred millionaires who would love to get a multi-year tax break and only have to pay £30,000 in tax, even if they had to structure their business affairs to limit money they brought into the UK from abroad.
I would certainly have made use of that opportunity during my high earning, foreign working period in the late 90’s and early 2000’s, but instead I had to pay the full wack of Tax and National Insurance which was a hell of a lot more than £30,000 a year.
As for Ms Murthy being subject to capital gains on property, being that she’s married to the UK’s Finance Minister, one would have thought it pretty obvious that she should own UK property in his name if it was tax efficient for her to do so, otherwise why bother getting married in the first place.
There is something to be said for a reform of the non-Dom rules but anyone expecting a flood of extra tax is likely to be disappointed. What we will most likely get is a flood of wealthy foreigners leaving the UK.
We currently get £30k (rising to £60k) a year from the likes of Ms Murthy plus whatever tax she pays on UK source income. If she left the UK, we would get £0. Whether the exchequer would be better off following a reform of the non-Dom rules is debatable.
Potato: “I am saying her choice to use it was wrong” April 7th 12:18pm on his blog.
Potato: “Murty isn’t wrong for claiming to be non-domiciled” April 7th 5:19pm writing for inews.
Unbelievable. He’s been thinking about this issue for well over a decade and still can’t share a consistent line.
If that is the cost for having the same tax rules that apply to everybody equally without exception or favour then that seems to me a price worth paying.
If the rules hadn’t been here, how many of these foreigners would still have come to the UK anyway?
Pretty sure that the Russian oligarchs were looking for somewhere to launder their dodgily acquired cash, take a time out from Putin’s ravings and have a refuge in case the peasants started revolting again. The non-Dom stuff barely applies since most of their actual income is opaque, held by proxies like Mossack Fonseca. Sure, what income they remitted to the UK would be taxable, but again, is that worth the price of dealing with these sorts of people?
Your average MP would probably say “Yes”, since they want to get invited to the oligarchs parties and maybe get a snifter of some of that wealth, but I doubt the vast majority outside the Islington/Westminster bubble would agree.
Again, this is not about greed, it is about having a level playing field. If we’re to have progressive taxation* then that tax regime must apply to everyone from the pauper in his hovel to the Queen in her castle.
* – Personally I’d prefer a fixed, low, single rate of tax above a tax free limit rather than the current progressive rates and the opportunities for manipulation, obfuscation and fiscal drag it creates.
“Deemed domicile
5.21 From 6 April 2017 new deemed domiciled rules apply which change the way a previously UK resident but not UK domiciled individual is treated. An individual who is not domiciled under English common law will be treated as domiciled in the UK for tax purposes if they meet 1 of 2 conditions.
Condition A – the individual:
was born in the UK
their domicile of origin was in the UK
was resident in the UK for 2017 to 2018 or later years
Condition B – the individual:
has been UK resident for at least 15 of the 20 years immediately before the relevant tax year”
It seems to me that HMRC have their own definition of domicile, which is different from the common law and very similar to residence. If I read this correctly, HMRC can decide for you what your tax domicile is, which is rather different from the former concept. But I don’t see anyone on this thread acknowkedging this.
https://www.gov.uk/government/publications/residence-domicile-and-remittance-basis-rules-uk-tax-liability/guidance-note-for-residence-domicile-and-the-remittance-basis-rdr1#how-does-domicile-affect-your-uk-income-tax-and-capital-gains-tax-liability
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