Attacks on Rishi Sunak’s wife are based on ignorance – she is fully entitled to non-dom tax breaks

When you enter political life you become a target for criticism. In particular, no one becomes chancellor expecting to be popular. Rishi Sunak has acknowledged that. 

After a good start, his popularity has fallen dramatically. In my last article I set out my criticism of his tax policies, which many readers seemed to agree with.

The public are entitled to question the way he operates. At the risk of alienating readers, however, I want to set out why I think the attacks on his wife are misplaced.

Firstly, she is not a public figure. She has kept herself and her children away from the glare of publicity, as I believe she is entitled to do. She is also entitled by law to have her tax affairs kept private.

The second issue is about the special treatment available under the law to those from overseas who qualify as non-domiciled, frequently referred to as non-doms. In my view, there has been some misunderstanding of how the non-dom law works, deliberate or otherwise, both in press reports and in comments from some politicians. Several have even managed to confuse domicile with residence, two very different things.

I would like to clarify the rules and explain them in their proper historical context.

Your residence for tax purpose is decided on the basis of your physical presence, now prescribed by detailed statutory rules. Domicile is about where you originated and has little to do with residence. I know of many cases of people now in old age who have lived in Britain since early childhood but are still classified as non-domiciled. 

You acquire a domicile at birth from the domicile of your father. This typically remains with you for the rest of your life. It is possible to change it to a domicile of choice but this is very difficult to do. If you have retained a connection with your country of origin, the law will continue to treat you as retaining your original domicile. 

In particular, it is not something you can choose one way or the other. It is a matter of fact and law. There have been many court cases over the years that confirm this, including two recent cases in which I acted as an expert witness at the High Court.

The main tax advantage of being a non-dom is the ability to be assessed on your overseas income and gains on a “remittance” basis: essentially only what you bring into the UK.

This treatment was established in 1799 when income tax was introduced. It has been debated in Parliament many times over the years.

In 1988, Norman Lamont put forward detailed proposals to limit the availability of this treatment. The proposals were subsequently withdrawn without any explanation. A few years ago I discovered from an impeccable source that he had been instructed to do so personally by Margaret Thatcher. 

She recognised the great benefit generated for the country from the enterprise of those who came to Britain and the inward investment that frequently came with it. She did not want to damage that.

In opposition in 1994, the Labour party issued a document called “Tackling Tax Abuses”, believed to have been written by Gordon Brown, which said: “It is not fair that a wealthy few be allowed to work or live in the UK without making a fair contribution through taxation.” 

Despite this he made no changes to the rules during his 10 years as chancellor. Many believe that he was prevented from doing so by Tony Blair, who had become financially dependent on large donations to the party from a number of wealthy non-doms.

In 2005 I took part in a review of the rules by the international division of HMRC. My suggestion was that if the rules had to change it would be logical to treat income and gains on the same basis as inheritance tax, whereby you ceased to qualify for non-dom status once you had been resident here for 16 years and you are deemed to be domiciled in Britain for IHT purposes. 

However, the report was published without any actual recommendations; it simply noted that there was a difficult balance to be drawn between fairness on the one hand and the benefits to the economy on the other.

Matters changed in October 2007 when George Osborne said a future Conservative government would charge a fee of £25,000 a year to non-doms who elected to use the remittance basis. 

A week later, the new chancellor, Alistair Darling, matched this with his announcement of a £30,000 charge. In 2017 the Government revised the rules again by effectively restricting the remittance basis to those resident here for no more than 12 of the previous 14 years.

Mrs Sunak is the daughter of a very successful self-made man who plans to give the bulk of his wealth to charity. He has chosen to give some shares in his business to his children and those shares are now very valuable. We need more like him in the world. I wish he was British.

His daughter has not taken advantage of a loophole any more than someone who makes contributions to a pension scheme or Isa. She has made an election put there by law and available to those in her position. She is fully entitled to make that election without criticism from others. 

There is now the possibility that she will become the only person in the country who qualifies for the benefits of non-dom status but is deprived of those benefits solely because of who she married. 

That cannot be right.


Tax Hacks is written by Mike Warburton, previously a tax director with accountants Grant Thornton, and is published twice a month on Tuesdays. You can email Mike on taxhacks@telegraph.co.uk 

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