Rishi Sunak has been urged to provide “full transparency” over his family’s tax arrangements and explain whether he helped to shape government finance rules to benefit his own interests.
Opposition parties and campaigners have also called on the chancellor to disclose his links to Britain’s overseas territories afterThe Independent revealed claims that he was listed as a beneficiary of tax haven trusts.
Labour has called on him to urgently clarify whether he helped “shape” tax rules through the recent Finance Act 2022 to benefit wealthy investors with non-domicile status.
Mr Sunak’s standing among Tory MPs has been rocked after The Independent revealed that his wife Akshata Murty holds non-domicle status – although she has since said she will pay UK taxes on all her worldwide income.
A Whitehall probe is now underway to find out if any government officials or advisers provided Ms Murty’s tax details.
Some Conservatives believe this week’s tax rows have damaged his chances of ever becoming prime minister. “His standing has certainly fallen,” one senior Tory said.
The Independent understands that Mr Sunak suggested to a contact in finance shortly before his Spring Statement that if he couldn’t become prime minister, he might return to the industry before the next election.
But a source close to Mr Sunak said: “Rishi has no intention of leaving politics.”
The chancellor is understood to have moved his wife and daughters out of the spotlight of Downing Street to their mews house in west London.
Sir Keir Starmer’s party said a scheme in the Finance Act 2022 allowed fund manager non-doms to benefit by not having to pay tax on foreign earnings.
“We need reassurances that the chancellor did not make an enormous breach by shaping tax policy to benefit his own personal finances,” said a Labour spokesperson. “He must answer these questions now and bring full transparency about his arrangements.”
Labour said any “trace” of the chancellor attempting to influence the relevant rules in the Finance Act 2022 would constitute “a serious breach of the ministerial code” which requires any potential conflicts of interest to be disclosed.
The government responded by defending the scheme – saying tax relief given through the new “qualifying asset holding companies” (QAHC) regime was only available to fund executives who manage portfolios on behalf of investors rather than individuals.
It comes as transparency campaigners called on Mr Sunak to explain whether or not he had benefited from his wife’s family’s use of trusts set up in overseas territories.
Trusts in the British Virgin Islands and Cayman Islands – created to manage the financial affairs of his wife’s family’s interests – note Mr Sunak as a beneficiary in 2020, according to people familiar with her finances and documents seen by The Independent.
“We need to have clarity on these trusts on the nature of these trusts,” said Paul Monaghan, chief executive of the Fair Tax Foundation.
Mr Monaghan pointed to the government’s efforts to boost transparency over wealth held in offshore entities through its recently-passed Economic Crime Bill – and ministers’ promise of a second such bill in the next parliamentary session.
He added: “There is a question of potential conflict of interest for the chancellor, if he has made use of a trust in secrecy jurisdictions, when we are looking to get greater transparency and wipe away the veil of secrecy.”
Tax havens often offer a high degree of financial secrecy when companies are registered there, or trusts are created as beneficiaries of companies.
But the use of tax havens by British residents is entirely legal, and there is no suggestion of legal wrongdoing. A spokesperson for Mr Sunak has said they “did not recognise” the claims on the use of tax havens, while Ms Murty has declined to comment.
The deepening row comes as it emerged that Ms Murty could save £280m in inheritance tax by holding onto her non-dom status.
Tax expert Richard Murphy said Ms Murty might still be able to avoid up to £280m in inheritance tax because of a “loophole” created in treaty between the UK and India dating back to the 1950s.
Labour and the Liberal Democrats have called on Ms Murty, who remains an Indian citizen, to pay the back taxes saved through not having to pay UK taxes on her overseas income. It has been estimated that she potentially saved up to £20m in UK tax through the legal arrangement.
There are also growing questions about Mr Sunak’s use of permanent US residency status, after he admitted holding a US green card while he was chancellor between February 2020 and October 2021.
There is no suggestion that either Mr Sunak or Ms Murty have broken any laws through their tax arrangements.
However, on Saturday the SNP called on Mr Sunak to publish his tax returns for the period he was an MP and held a US green card to clarify whether or not he avoided paying more tax in the UK.
The Lib Dems’ Treasury spokesperson Christine Jardine said Mr Sunak “must be transparent about his financial arrangements and the answer the question – have they been paying their fair share?”
A senior G7 diplomat, who is not British and who worked with Mr Sunak on efforts to improve corporate tax transparency, said they would have preferred to know more about the potential conflicts of interests at play.
Asked about the Finance Act of 2022, a government spokesperson said: “Relief provided under the QAHC regime is not available to individual taxpayers, whether they are domiciled in the UK or not – it is only available to fund executives who manage portfolios on behalf of investors.”
They added: “The QAHC regime was consulted on widely and voted through by a majority in the House of Commons. It was introduced as part of a review aimed at boosting UK competitiveness – ensuring that taxes paid by those institutions affected was proportionate to other jurisdictions, enabling the UK to remain as an attractive place to invest and create jobs.”
