What is non-domiciled status? Why the row over Rishi Sunak's wife's tax affairs?

Akshata Murty has a non-domiciled tax status. Credit: PA

Rishi Sunak has come under fire after it was revealed his wife, Akshata Murty, has a non-domiciled tax status because of her Indian citizenship. ITV News looks at what a "non-dom" is and why the arrangement is so controversial.

What is a non-domicile resident?

The term typically applies to someone who was born overseas, spends much of their time in the UK, but still considers another country to be their permanent residence. Citizenship of an individual living in the UK is irrelevant when it comes to non-dom status as it is possible for a UK citizen, or someone born in the UK, to claim they are a non-dom.

According to the government, a person’s domicile is usually the country where their father considered his permanent home when the individual was born. In Ms Murty’s case, she was born in India, so she ticks this first box for claiming she is not domiciled in the UK.

Others can also inherit their domicile from their parents, meaning they can still be born in the UK but have non-dom status.

How much tax do you pay if you have non-dom status?

The rules state non-doms do not have to pay UK tax on foreign income or gains, unless said money is brought into the country or transferred into a British bank account. Non-doms must still pay tax on money earned within the UK, however

Does a non-dom tax break last forever?

Non-dom status is lost after an individual has been a UK resident for at least 15 of the previous 20 years. After the status is dropped, they are "deemed domiciled" and have to pay tax on their worldwide earnings.

If a non-dom has been a UK resident for at least seven of the previous nine tax years, the government charges them £30,000 every year. If they have been in the UK for 12 of the last 14 years, they must pay £60,000 per year.

Non-doms can choose to pay UK tax on foreign income. However, many high net worth individuals will opt for the yearly charge because the income received from foreign businesses and investments is likely to lead to a far higher tax bill.

Ex-Chelsea boss Roman Abramovich had non-dom status when he lived in the UK.

Which big names have claimed UK non-dom status?

Lord Ashcroft, a Belize-based businessman and major Tory donor, was found to have non-dom status in 2010. Zac Goldsmith, also a Tory peer, partook in the scheme until then-party leader David Cameron made him give the status up.

Russian billionaire and former Chelsea FC owner Roman Abramovich claimed non-dom status when he lived in the UK. Steel tycoon Lakshmi Mittal has also benefitted from the break.

If the set up is legal, why the row over Ms Murty's finances?

Critics have said use of the non-dom status looks bad at a time when the Chancellor has increased the tax burden on the British public and while the cost of living soars.

Andy Summers, Associate Professor at the London School of Economic’s Law Department said: “The non-dom regime is used mainly by the very rich, who get tax breaks not available to ordinary taxpayers.

"This giveaway could be costing the Treasury significant revenue and deserves more scrutiny at a time when everyone else is facing tax rises.”