I have campaigned on domicile related issues ever since I began working on tax justice and have written newspaper articles and broadcast on the issue. I helped advise Ed Miliband on it in 2015. There are 192 posts here on the issue. So I admit the news that the Chancellor's wife is a non-dom is not welcome to me. I have written this Twitter thread this morning which does, however, take the passion out of this and simply asks fair questions that need answers:
It's been reported that the Chancellor's wife, Akshata Murthy, is not tax domiciled in the UK. This has been confirmed by a statement issued on her behalf. But I think the statement of facts issued by her is wrong. And I also suggest HMRC could challenge this claim. A thread….
I need to report what a spokeswoman for Murthy has said, which was: “Akshata Murthy is a citizen of India, the country of her birth and parents' home. India does not allow its citizens to hold the citizenship of another country simultaneously. So, according to British law, Ms Murthy is treated as non-domiciled for UK tax purposes. She has always and will continue to pay UK taxes on all her UK income.” I would have hoped that Ms Murthy could buy advice that was right, but this statement is wrong.
Domicile has nothing to do with a person's nationality. Nor does it have anything to do with not being able to have a British passport because a person holds citizenship from another country. And non-domiciled status is certainly never given for that reason.
The first thing to note about non-domiciled status is that it is given to no one if they do not apply for it. In that case the implication in Ms Murthy's statement that she has to be treated as non-domiciled is simply wrong: she is only non-domiciled because she asked to be so.
Second, she can also give up the claim to be non-domiciled at any time. Just because she was non-domiciled when she arrived in the UK as a newly married person does not mean she has to keep the status now. So the fact she's still non-dom is also a choice.
In other words, the claims made in the statement issued by Ms Murthy are wrong, and as evidence, just because a person has Indian citizenship will never automatically grant them non-dom status in the UK. It might help, but never be enough.
That's because non-dom status is about where a person's natural home is. Essentially, it is a test based on the evidence that they are only temporarily resident in the UK because they retain the intention to return to another place, which is their natural home.
There are many ways to prove where your natural home is. Family ties are a big issue. So too is retaining strong ties with the country you claim to be your place of domicile. For example, you own a house there and only rent in the UK because you intend to leave sometime soon.
Making no strong ties with the UK is another way of proving this is not your domicile. Choosing to educate your children in your natural home and not in the UK might be another. So too might holidaying their frequently be a good indication.
Having a source of income in the place that is your natural home helps, but only if you actively manage it.
What the Revenue here think – and legislation now backs this up – is that the longer you're in the UK the less likely it is that you are domiciled elsewhere. The evidence of your behaviour then suggests that your home is really here.
The law on this relates to what is called ‘deemed domicile'. If as a matter of fact you have been tax resident in the UK for 15 of the last 20 years, you're deemed to be domiciled here whatever you say. It seems very unlikely that Ms Murthy is at this point, as yet.
But the Revenue can challenge anyone's non-dom status whenever they wish (if only they had the resources to do so, of course, which is another issue). I suggest that they could do this in the case of Ms Murthy.
She is reported to have four homes around the world, with her husband Rishi Sunak. Three are in the UK and one is in the USA, which is called a holiday home. I have heard no reports of a home in India, which does not help a domicile claim.
The fact that they choose to holiday in the USA and not India does not help either.
And being here for a long time, married to a man whose current career is only possible in the UK is not a good look for someone who claims to plan to leave sometime. As far as I know the children of this marriage are also educated here.
And we know that Ms Murthy is a donor to Winchester School, which shows a commitment to the UK and its establishment, which is often considered a sign of where you think your home might be.
I am not saying that any of these facts are persuasive in themselves. There might be other facts to consider, of course. But could they be enough for HMRC to open an enquiry to ask why she continues to think herself domiciled in India? I think so.
The evidence that as the wife of a senior government minister who very clearly has ambition to further his career in UK politics she is likely to remain in the UK, quite probably forever, looks to be particularly compelling to me.
So, my question is a simple one, and is whether Ms Murthy is really non-domiciled at all now? I stress, I cannot answer the question. All I am saying is that there enough evidence to ask it.
And what I am also saying is that the claim to be non-domiciled is one she has made by choice that she can withdraw at any time (albeit at significant financial cost). In that case I think it her job to justify it, and the statement she's issued so far does not do that.
I will leave the ethics of this aside. The reaction in the media makes clear where most people stand on that issue. I am just addressing facts here. And I suggest the Chancellor has a duty in this case to get his wife to put the facts on the table or drop her claim that save tax.
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Proof – if ever it were needed – that this lot just think that the rules do not apply to them.
But then again, as neo-liberals, why would we expect anything different?
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.
Part of a claim to change domicile would involve (effectively) renouncing all ties to your country of domicile – not least renouncing your citizenship of that country and cutting all financial links with interests there. Indian law does not allow dual citizenship.
Might I suggest you try reading HMRC’s internal instructions on Residence and Domicile. For example at RDRM 20080, HMRC state ” Although domicile may change, there is a presumption in favour of the continuation of an existing domicile.” and RDRM 23030 “A change of domicile is never to be lightly inferred, particularly a change from a domicile of origin to a domicile of choice, which is regarded by the courts as a serious step requiring clear and unequivocal evidence.”
You do not have non-Dom status in the U.K. without applying for it
Fact
And I know that manual
And facts do change
So do domicile opinions
Which is why to make life easier we got deemed domicile
It is you who is getting things wrong
I am 100% right – what ever a person’s domicile no one has non dom status without applying for it
If it is I who is getting things wrong, it is also HMRC and the courts.
I will leave it to your readers to decide if it is I, HMRC and over a century of decided tax cases (for example Udney v Udney from 1896) who is wrong or you.
I am sure you will claim to know, for example Henwood Barlow Clowes Conflict of Laws 15th edition, which C states at Chapter 6, Section 2: B
“Rule 10:
Every independent person can acquire a domicile of choice by the combination of residence and intention of permanent or indefinite residence, but not otherwise.”
But it is clear you do not.
You do not ‘apply’ for non-domicile status, you state what, under common law, your domicile is.
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
I think there is a confusion developing here between whether somebody is a “non-dom” or not which is a matter of legal fact. You can ask for a determination of your domicile status, but that is an attempt to work things out based on the facts of the situation.
You can apply for the “remittance basis of taxation” and that changes the way in which you are taxed.
Not dom is a fact
Non dom for tax is an expensive choice
That’s the distinction
To clarify: domicile is a matter of fact, but what you have to apply for is taxation on the remittance basis (where foreign income is taxed by the UK only if it is remitted to or otherwise used for benefit in the UK). Most foreign domiciliaries do not nowadays apply for remittance basis treatment, because there is a flat rate £30,000 annual charge (or £60,000 if you’ve been resident for 12 years) to do so. So the remittance basis is only worthwhile if your foreign income is large enough that the UK tax would be more than £30,000 and you can also afford to keep and spend the foreign income abroad. That’s why the “hundreds of thousands” don’t apply.
The distinction is between non dom- a tax status – and not domiciled, a legal issue
I discussed non-dom
Not dom was not the issue being discussed
Non dom is a choice
Correction, more than seven years. The first seven years are free. You have to pay the charge from year 8 onwards, even more from year 13, and then deemed domiciled from year 16.
Agreed
To be clear, there is a fixed remittance basis charge if a non-domiciled person has been resident in the UK for more than 6 years and wishes to continue to claim the remittance basis:
* £30,000 for non-domiciled individuals who have been resident in the UK for at least 7 of the previous 9 tax years immediately before the relevant tax year
* £60,000 for non-domiciled individuals who have been resident in the UK for at least 12 of the previous 14 tax years immediately before the relevant tax year
https://www.gov.uk/guidance/remittance-basis-changes
So plenty of non-doms who come to reside in the UK for up to six years can claim the basis without paying a charge. Before Brexit, that might have been Polish plumbers, say. But for some people, paying £30,000 makes sense if that means other income and gains are not taxed in the UK.
How many? About 75,000 people claim the remittance basis each year. About 2,000 pay the remittance basis charge. See Figure 6 here: https://www.gov.uk/government/statistics/statistics-on-non-domiciled-taxpayers-in-the-uk/statistical-commentary-on-non-domiciled-taxpayers-in-the-uk
Agreed
I got the second period wrong on air this morning – I quoted the pre-2017 rule, annoyingly….
I think there are a number of errors here.
Firstly we all have a “domicile of origin” which sticks with us unless we obtain a “domicile of choice”, this is a matter of legal fact. I have deliberately ignore the possibility of a “domicile of dependence” because I don’t think it could apply to an adult. An individual doesn’t need to “claim” to be a non-dom because we all have a domicile and whether you are a non-dom or not is simply a matter of fact. On the other hand it is entirely an individual’s own choice whether they claim the “remittance basis of taxation”.
Domicile tends to be sticky so Sunak’s wife needs to intend to reside in the UK indefinitely for her domicile to move from India to the UK. Where she goes on holiday isn’t going to change her domicile or keep it in India. It is only by intending to live in the UK forever that her domicile will move from India to the UK. I am aware that there are all sorts of deemed domicile provisions or elected domicile provisions available for inheritance tax purposes, but domicile is a legal concept beyond the realms of taxation.
However having said all that I am inclined to think her situation is quite messy because at the end of the day to support her claim to be domiciled in India and avail of the related UK tax benefits she really needs to be claiming she intends to leave the UK eventually. It doesn’t even matter which country she plans to go to because her domicile would remain in India until she is living in a country she intends to remain in forever.
On this basis maybe she could confirm whether:
1) She views her marriage as temporary and plans to leave the UK in the future.
2) She views her marriage as permanent but plans to leave the UK and live apart from her husband.
3) She expects to leave the UK and believes her husband is planning to join her.
It seems you agree
I have no disputed for a moment she had and may even still have Indian domicile
I am saying her choice to use it was wrong, especially of late
I can see no errors in what I wrote
Richard,
(1) thanks. The Murthy/Sunak statement seems to be straightforwardly deceptive. It clearly suggests that Murthy’s status as Indian domiciled for tax purposes is mandated by her citizenship. Even the person disagreeing with you BTL agrees this is false. And the more modest version of this suggestion — that her non-dom status is not a matter of her choice — again, that looks simply false.
(2) the statement is weird, because there’s a much more straightforward moral defence of her tax affairs available (that investment income from Indian investments by Indians should be taxed in India, and need not be taxed again somewhere else). Why did they not make that argument? Why this bizarre “we had no choice” line?
I wonder if you think that the line of defence I suggest in (2) is misguided for some reason — and if so, how. I guess that Sunak/Murthy might have avoided defending their situation along those lines because it implies perhaps a stronger adherence to the principle of taxing economic activity where it really takes place than they, and those they depend on, would feel comfortable with. But that is no more than speculation. I do think it’s genuinely puzzling why they didn’t make that more straightforward defence.
But still not a good defence
That would not stop higher rate taxes here is appropriate
Sorry, I’m not understanding why it isn’t a good defence. (I appreciate you’re typing at speed! But I can’t understand your one-liner indication of the kind of explanation you favour.) Thanks.
India can always tax at source – that is its right
That decision has no impact on the U.K. tax bill
And we have no indication she is Indian tax resident
Ah, OK.
So your point is that we don’t actually know whether she does pay tax in India on income derived from economic activities in India.
I’ve read this: “The BBC has been told that Ms Murty does pay taxes abroad on her foreign income. It is not clear how much she pays and at what rate.”
“Abroad” is suitably vague. There is no clear statement that she pays *in India*.
OK. So, I think I’ve no question about most of this. All v helpful.
But what about the further point you made: I thought you implied that your own view was that *even if she had* paid tax in India on investment income in India, that would *still* not justify using non-dom status to avoid being taxed on that income (again) when it was brought to the UK. Is that your view? And if so, is there some place you’ve defended it?
She is tax resident here
What is the justification for her not paying her taxes here like almost everyone else?
This is really not rocket science ethics
You are assuming in your suggestion that Indian generated income should be taxed in India, which I think I agree with, that she is paying tax in India. She may be, or she may be using a tax haven. All that we know is that she is not paying tax on her foreign income in the UK.
Whatever the legal position, the political position is untenable if Sunak want to be Prime Minister.
So, how badly does he want to be PM? How badly does she want him to be PM? How badly does she want to hang on to her money?
My guess is that as soon as he declares his running in a Leadership contest she will abandon her “non-dom for tax purposes” position.
Sorry, I went on rather longer than I expected here.
I don’t know all the relevant facts, and the following is all based on public information and reasonable supposition, and I’d welcome any corrections if I go wrong, but it seems plain as a pikestaff to me that Akshata Murthy has a domicile of origin in India. Assuming she has not changed her domicile by adopting a permanent home elsewhere, she will still as a matter of fact and law be domiciled in India. She still has strong family ties there, she is a citizen, she has investments there, I’m sure she visits from time to time. Perhaps she intends to retire there, or return if her husband pre-deceases, or have her funeral rites there. I expect she will have been advised on such matters before becoming resident in the UK.
One would need to know the facts better, but I suspect she became UK resident some time after their marriage in August 2009. So she might be on the cusp of becoming deemed domiciled in the next two to three years, and again I am sure someone is advising her on that.
Domicile only has much of a tax effect in the UK if you claim to be taxed on a “resident but not domiciled” basis, yes, so your overseas income and gains are taxed on the remittance basis rather than the arising basis. (It will also have an effect, for example, on inheritance tax on non-UK assets, such as the “holiday home” in the US.)
The fact of being domiciled outside the UK does not change the tax position: she would have to assert that fact to HMRC. As I expect she has done so, for understandable financial reasons, and I expect HMRC would not want to waste time challenging it. She is not an appendix to her husband. She has her own independent life and assets. There may even be a pre-nuptial agreement or a marital trust of some sort. Equally, she could have chosen *not* to assert that status, if she wanted to make a larger contribution to the tax revenues of the place she has made her home for over a decade.
Someone in India will have to confirm this, but I think as a non-resident Indian (NRI) she is liable to tax in India only on income arising in India, not income arising outside of India. So she might have income (from the US, say) that is not taxed in the UK (res non dom) or in India (NRI). Such income might be taxed where it arises, or in some cases it might be possible to gather it tax free offshore. That income would be taxed if remitted into the UK (or if remitted into India too, I think). There are likely to be several bank accounts offshore – outside the UK and India – all fully disclosed of course, but useful to manage cashflows and avoid unwanted remittances.
As a non-resident, she would be liable to have 20% tax withheld on dividends paid by an Indian company such as Infosys, but as a UK resident she could claim to have that reduced to 10% under the UK India double tax treaty. I think the law changed recently, and in principle she would now be liable to income tax on dividends from India in slabs at rates of up to 30% (I think, possibly with a surcharge). But until 2020 non-residents were not taxed on their dividends from India, apart from withholding. And the treaty should still protect her from paying anything over 10% in India while she remains resident in the UK.
According to information published by Infosys – https://www.infosys.com/investors/reports-filings/quarterly-results/documents/share-holding/clause-35-december31-2021.pdf – she has a 0.9% interest, equating to 38,957,096 shares. She had the same number of shares in June 2020 (then 0.91%).
The company pays two dividends each year. Last year that was 12 and 15 rupees per share, and the 2022 interim dividend is 15 rupees per share. So on a shareholding of 38,957,096 shares, that was 1,051,841,592 rupees in dividends in 2021 (about £10.6 million) and 584,356,440 rupees so far in 2022 (about £5.9 million).
In the UK, most of that would be taxed at 38.1% in the last tax year, with credit for the 10% withheld (since 6 April 2022, the additional rate of income tax for dividends is now 39.35%). So that is about £3m of tax saved last year by being non-domiciled and claiming the remittance basis, just on dividends from this one company. She may have other assets and other income and gains. That tax would become payable if she remits the income to the UK, but I expect that would only be required if she runs out of “clean capital” held outside the UK.
It does seem extraordinary that our Chancellor of the Exchequer – responsible for cutting benefits, and raising NICs, and holding tax allowances despite inflation – lives in such a gilded millieu, with his wife receiving (it seems) millions of pounds of income each year potentially taxed at just 10%. Lucky for some.
Many thanks
I have been suggesting the 10% rate might (I stress, might) apply
I seems reasonably clear she is resident for tax purposes in the UK, and not resident for tax purposes in India. So it seems to me the treaty should apply. But I don’t know all the facts.
That is a reasonable conclusion
I am presuming that after 15 years of UK tax residence then she will automatically lose her non-dom status. My guess is that this is at most 2 to 3 years away – and the way things stand with her husband’s employment and the kids’ education etc it would look pretty clear that domicile here in the UK is (and has been for a while) pretty much on the cards. In such situations do we know if HMRC can or ever does challenge non Dom status before the 15 years are up? If they can and they haven’t yet I would say Sunak’s position as the chief tax raiser would be pretty untenable in normal times.
Under the Indian double tax treaty apparently not
So HMRC has good reason to intervene
Just to be clear, that was about the effect of the UK-India estate taxes treaty on inheritance tax for an Indian domiciled who has a deemed domicile in the UK under UK domestic law.
Under Article 4 of the income tax treaty, to determine residence for the purposes of that treaty, you look for where a person is liable to tax “by reason of his domicile, residence, place of management, place of incorporation, or any other criterion of a similar nature”, and if both states claim residence, the tie can be broken for individuals by the location of a permanent home (and if there is one in each state, where “personal and economic relations are closer (centre of vital interests)”) are located; and if that does not conclude the matter, at habitual abode; then where the person is a national; and finally, if none of that breaks the tie, the states have to agree.
https://www.gov.uk/government/publications/india-tax-treaties
I can’t see that the UK’s deemed domicile rule makes much of a difference under the income tax treaty, if she is clearly resident for tax purposes in the UK and not resident in India. After 15 years, I think she would be subject to income tax and capital gains tax as a resident who is deemed domiciled in the UK. I agree, it seems that threshold should be passed in the next few years, and this political turmoil could be lanced by her voluntarily agreeing to give up the claim to be taxed on a non-domiciled basis for the next few years.
@DanNeidle
“If your domicile is outside the UK then you are a non-dom. That either is or isn’t the case – it’s not a choice.”
You say different so you are saying Dan Neidle is wrong??
You are not dom
Non-dome is a tax status applied for to HMRC
Quite different
Large numbers of not doms are not non-doms
So he must be wrong
A person is either domiciled (or deemed domiclied) in the UK or they are not. To an extent, a person has a choice whether to establish a new domicile, but that is not easy, They also have a choice over whether they claim the benefit of non-domiciled status to change their tax position in the UK. In some cases, that decision involves paying a large fee so it is not an accident.
Dom or not is fact
Non-dom is choice
Domicile should be different from tax status.
UK law could be changed so that if you are ordinarily a UK resident then your tax status is resident here. The non-dom distinction allows certain UK residents to have a different tax status and so avoid UK tax on worldwide income to other UK residents/nationals. I don’t see why that should be the case. You can still be a non-domiciled person but your tax status should be based on your country of residence.
All the above arguments about the legal distinctions between domicile and non-domicile should be irrelevant when it comes to tax status.
I’d like to have time to reply on my desired reforms
They are on the blog – but in about 2009
Hello Richard
I think you have muddled up someone’s domicile status and whether or not they claim to be taxed under the remittance basis.
From what we know, Ms Murthy is clearly Indian Domicile at birth and so does not need to claim or apply for this.
She does have to make a claim to be taxed under the remittance basis.
I have not muddled this at all
I have been really clear by differentiating not dom and non dom
The problem is all yours
And of course there is a claim requiring proof of being not dom to be non dom
Extraordinary selective quoting there, Paul. Dan’s next two tweets say:
“But the key thing is that non-doms get to choose whether to pay tax on their worldwide income as the rest of us do (“the raising basis”) or only on their UK income (“the remittance basis”).”
[typo there – “rising basis” should be “arising basis”]
“That absolutely is a free choice that Mrs Sunak had, and she positively chose the remittance basis. The law couldn’t be clearer”
And one earlier in his timeline says:
“My tax lawyer view on Akshata Murthy:
1. Plausible that she is a non-dom
2. Claiming remittance basis isn’t avoidance
3. But it was a choice, and IMO an inappropriate one. Creates a serious conflict for Sunak
4. Damaging for the tax system – “one rule for them, one for us”
For what it is worth, in her position, I think I would have claimed the remittance basis if I was in the same position as her. Who can honestly say they would choose to pay millions of tax more than the law requires, rather than truthfully ticking a box on the tax return instead. I have a pension and ISAs, I would buy duty free. You might argue about the policy, but as things stand this is an option that the law creates for her. She has probably done so for years, since before he was elected in 2015. He might have little visibility on his wife’s financial affairs: there may be a family office to organise all of this for her.
But it has created huge political peril for her husband. Not least, it puts him in a difficult position on the reform of taxation of non-doms. But perhaps this is the opportunity to say that “permanent residents” must pay fill UK tax, like US green card holders. Perhaps indefinite leave or citizenship should be the trigger? Perhaps deemed domicile after 5 or 7 years?
Later in his timeline, Dan has made an even better point. As an Indian, she does not become deemed domiciled in the UK for inheritance tax purposes after 15 years, as she is protected by Article III(3) of the 1956 UK-India estate duty treaty (which seems to remain in force, but not on HMRC’s website apparently). https://www.legislation.gov.uk/uksi/1956/998/made So if she remains domiciled in India, there will be no inheritance tax in the UK on the value of her shares (hundreds of millions of pounds) – or any other other non-UK property – when she dies. (And even if that is not the case, she would be advised to put her non-UK assets into an offshore trust before she becomes domiciled or deemed domiciled, so it remains “excluded property”.)
That last point is new to me
And for once I largely agree with Dan
‘Normal’ people don’t understand the arcane tax differences between residence, residence for tax purposes, and domicile. I looked into non-dom rules years ago when as a US passport holder I thought I was taxed unreasonably in both the US and the UK. The US taxes worldwide income; only Eritrea also does so I think. Not India. If the cost of non-dom status is less than the taxes you would owe, it’s a good investment. Your entire tax liability is taken care of. So Mrs. Sunak. She claims her “natural home” is somewhere other than the UK. The suggestion years ago for me was wherever my father (long dead) lived. (Feminist despair) Her father lives in India, so that could work for her. But she doesn’t then necessarily pay Indian tax. I renounced US citizenship when I took UK nationality, and my tax status changed to non-resident alien. The US-UK tax treaty protects me from double taxation. If Mrs. Sunak has Indian nationality only (a good reason for non-dom status here) she is a non-resident citizen of India with tax liabilities according to that status. But since they do not allow dual nationality, she must have taken UK nationality, which would allow her to avoid Indian tax (as a non-resident alien) while paying UK tax as a resident in the UK for tax purposes. To reduce that tax burden, she could then claim non-dom status. At the time I was changing nationality and tax status, the non-dom charge was £35k, which is so far out of my tax reality that it was a laugh. But perhaps not for the wealthy like her.
https://www.ey.com/en_uk/ey-frank-hirth/how-to-determine-and-defend-domicile
EY seem to think there is an issue with the inadvertent acquisition of a domicile of choice here in the UK and that HMRC raise challenges to non Dom status on this basis. The question that needs to be asked is if they have done so for the Chancellor’s wife and if not why not, given that they appear to do so for others. She seems to have set a pretty low threshold for not having established a domicile of choice in the UK – and if she is not challenged it will probably make the avoidance of UK tax by others in similar positions a lot easier – which is somewhat embarrassing for her husband to say the least.
As a proponent of country by country reporting, shouldn’t you morally support this decision? After all it means she is taxed where profits are generated.
Wouldn’t it be morally dubious to insist these taxes should go to the U.K. instead of India?
With respect, you are confusing corporate group and personal tax
If you know anything about tax or will know these are very different issues
You would also realise nothing I say suggests India should not apply source taxation
Try engaging your brain next time
How much tax does she pay in India, James?
We are not talking about the profits of the company, which I would hope are taxed in India. We are talking about the income that she receives as dividends from her shareholding.
If I recall correctly domicile in the UK is based on , oddly , where your father has domicile of origin ( and Scottish domicile is separate from E&W domicile , not sure about NI). Mostly though is is an academic issue for tax purposes. Like a convoluted exam question. To take advantage of being a non dom in the UK for tax purposes ( and they can be considerable ) you have to OPT for that status as it is not automatically applied. For that reason alone the chancellor should resign as he must have known his wife’s tax status. Maybe he did not , but I doubt it. They whole thing sits badly. I believe she is thinking of revoking that status – too late. For a private couple this non dom thing is legal , it’s up to gov to change it. But plenty labour and con govs have chosen not to.
You are right about this being a choice