Rishi Sunak’s wife in £4m loan riddle: Tax experts call for investigation

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The taxman has been urged to investigate whether the Chancellor’s wife broke the terms of her non-dom status by giving her UK company £4.3 million in interest-free loans.

Tax experts said the personal loans to Akshata Murty’s venture capital firm, Catamaran Ventures UK, fall into a ‘grey area’ of the rules and last night called for HM Revenue & Customs to investigate.

The loans could ‘circumvent’ the basis of her non-dom status if they were found to give her ‘monetary or non-monetary returns’ – whether through profits or by exerting influence – it was claimed.

Individuals can give loans to British companies tax-free even if the money comes from earnings abroad that have not been required to pay UK taxes.

Accountants said they can be a way for non-doms to bring money into Britain without having to pay tax on it.

Last night Ms Murty declined to answer questions about the loans, the bulk of which were given in 2019 and 2020.

A spokesman for Rishi Sunak’s wife said she had ‘followed the letter of the law and complied with all rules in her arrangements’.

On Friday, Ms Murty agreed to pay UK tax on her global fortune in a bid to save her husband’s political career.

In a dramatic U-turn, the Indian heiress she would no longer apply to pay tax on a ‘remittance basis’, which allows non-doms to avoid UK tax on foreign earnings in return for a £30,000 annual fee.

She said: ‘I understand and appreciate the British sense of fairness and I do not wish my tax status to be a distraction for my husband or to affect my family’.

She is still set to save money on inheritance tax by retaining India as her formal ‘place of domicile’.

Being a non-dom on a remittance basis means that foreign earnings, investment income and capital gains are not liable for UK taxes as long as those funds are not spent in the UK.

This means if she kept the money in India for tax purposes, Ms Murty would be exempt from paying anything in Britain.

However, using the money to give a loan to her own company was a ‘grey area’ of the rules that raised questions, a tax expert said. The loan could provide her with ‘monetary or non-monetary returns’, or show a commitment to the UK.

Ms Murty is the sole director and shareholder of Catamaran Ventures UK, which invests in start-up companies.

She co-founded the firm with Mr Sunak in 2013 but he resigned his directorship and gave up his stake when he became an MP in 2015.

The company’s unaudited accounts describe her loans as ‘long term’ and interest-free but do not give any details about the terms or repayment schedule.

Since 2018, Ms Murty’s loans to the firm increased from £732,499 to £4.3 million in the latest accounts to December 2020.

Ms Murty’s father, N R Narayana Murthy, is one of the world’s richest men, with a net worth of more than £3 billion after co-founding tech giant Infosys in 1981.

Much of Ms Murty’s income is likely to derive from her 0.91 per cent Infosys stake which would have paid her a dividend of about £11.6 million last year.

Without her non-dom status, she would have had to pay £4.4 million tax on this in the UK.

Asked to clarify what happens to a non-dom’s remittance basis arrangement if they give a loan to a UK company, a spokesman for HMRC declined to comment.

Lord Sikka, professor of accounting at the University of Sheffield and a Labour peer, said the rules around non-doms were ‘not fit for purpose’.

‘They are archaic and belong to a bygone era,’ he added. ‘Non-dom status must be abolished.’

The Mail on Sunday can also reveal that Ms Murty’s fashion business, while inspired by Indian culture, had its design team and factories based in New York.

In comments made when launching the since-collapsed Akshata Designs, Ms Murty revealed she had a US focus from the start, described it as an ‘international company’ and planned to have her label sold ‘in stores all over America’ as well as one shop in New Delhi.

The brand’s website at the time of its launch said: ‘Akshata is based on a collaborative process that begins in India […] These materials are brought to New York, where a design team creates patterns and samples that highlight the beauty and uniqueness of the raw materials. The clothing and accessories are then produced at several factories in New York and New Delhi.’

In interviews uncovered by this newspaper, Ms Murty also revealed her husband encouraged her to start Akshata Designs, and that his ‘vintage ties’ were one of the things that inspired her designs.

Her fashion website biography in 2011 described her as a ‘Londoner’ who was ‘excited about exploring the rich history and culture that London has to offer for her young daughters.’

She said the ‘concept’ of the brand was to ‘use indigenous crafts as the basis for a fashion label, beginning with India and ultimately expanding to other traditions around the globe.’

Ms Murty developed the business plan for Akshata Designs while at California’s Stanford University, where she met Mr Sunak. She unveiled her first and only collection in 2011.

Last night The Mail on Sunday put ten key questions to Mr Sunak and Ms Murty. They were mostly not answered.

A spokesman for the Chancellor said: ‘As required under United States law and as advised, he continued to use his green card for travel purposes.

Upon his first trip to the US in a government capacity as Chancellor, he discussed the appropriate course of action with the US authorities.

‘At that point it was considered best to return his green card, which he did immediately.

‘All laws and rules have been followed and full taxes have been paid where required in the duration he held his green card.’

GLEN OWEN: The West Coast Chancellor who wants to turn Britain into ‘San Fran on Thames’ 

With his £335 trainers and white T-shirt and suit combos, Rishi Sunak has always exuded an unusually Californian air for a Tory MP – more West Coast than Red Wall.

And according to his Government colleagues, the Chancellor’s mindset is as American as his clothing.

He frequently alludes to his Santa Monica home in Treasury meetings, his children have joint US citizenship and, according to one source, he ‘mentions dollars almost as often as he references pounds’.

More contentiously, some fellow Ministers claim the 41-year-old is too close ‘spiritually’ to the global internet giants which have sprung up in Silicon Valley over the past few decades, leading to a radical reshaping of the global economy. ‘He is always talking about turning post-Brexit Britain into ‘San Francisco on Thames’,’ says a colleague, ‘while everyone else talks about a ‘Singapore on Thames’.’

The Ministers argue that this has had an impact on the Government’s approach to regulating the tech giants. When proposed new laws were being drawn up to tackle the anti-competitive behaviour of companies such as Google and Facebook, including the scrutiny of algorithms that discriminate against popular news websites and a requirement to pay media publishers for their content, the Treasury gained a reputation in Whitehall for acting as a block on the proposed reforms.

Akshata, who met Mr Sunak while studying at Stanford University, bought the £5.5 million penthouse in June 2014 when the couple were talking about settling down in California, only for their plans to change the following year when he entered Parliament for the first time.

The Chancellor tries to fly out to the flat, which boasts sweeping views of Santa Monica pier and the Pacific, as often as possible. He had intended to spend last Christmas there, but returned to London just a few hours after arriving in the US when he was informed that, in his absence, Boris Johnson was being pressurised by the Government’s scientific advisers to put the country back into lockdown for the rest of December. After averting the threat, he spent the festive period in Britain while his family celebrated on the beach.

Mr Sunak knows that working-class voters in critical Red Wall seats, which will determine the next election, are unlikely to sympathise with disruptions to his transatlantic jet-setting – but it undoubtedly contributes to the pressures building within the Sunak family.

Although Downing Street sources are adamant that the tax revelations have not been briefed out by them – the hands of Labour-supporting officials in the Civil Service are again detected – there is little doubt about the tensions between No 10 and No 11.

The situation was particularly volatile last September, when the Chancellor was, according to senior sources, ‘hours away’ from resigning over the Prime Minister’s plans to reform social care. Mr Sunak was bitterly opposed to Mr Johnson’s demand for him to produce £12 billion to shake up the care system, arguing against both the timing – he had already spent more than £400 billion on the Covid crisis – and the details of the policy, which included a cap on costs.

When the Prime Minister insisted on going ahead, Mr Sunak used the applied threat of his resignation to force Mr Johnson to introduce the Health and Social Care Levy to cover the cost through a 1.25 percentage point increase in National Insurance.

The issue triggered a further flashpoint between the pair earlier this year when sources claimed that Mr Johnson tried to persuade Mr Sunak to drop the rise.

Instead, the Chancellor used last month’s Spring Statement to cut fuel duty, tweak tax-free thresholds and signal a cut in income tax in 2024.

The backlash from voters led to a collapse in Mr Sunak’s ratings which, even before the tax revelations, had seriously dented his chances of becoming Prime Minister. The tax revelations emerged on the day the National Insurance rise came into effect, compounding the political damage.

Mr Sunak’s travails have aroused complex emotions in Downing Street. While life for the Prime Minister is easier with a subdued Chancellor, that advantage is offset by the wider damage caused to the Government by the narrative of double standards.

A source said: ‘There will undoubtedly be some schadenfreude in parts of the building as Rishi has been a tricky customer recently. His support during the rows over lockdown parties was conspicuously muted. But it is also a gift for Labour ahead of the local elections, so it is not exactly unalloyed pleasure.’

But if Mr Sunak does leave the Government to spend more time staring at Santa Monica’s sunsets, one man will be rubbing his hands with glee: Levelling Up Secretary Michael Gove, whose friends believe to be the most likely replacement as Chancellor.

It would be another compelling twist in the decades-long Johnson-Gove psychodrama.