Eastern Eye (UK)
Sunak ‘benefited by backing capital gains over dividends’
TAX RETURNS REVEAL PRIME MINISTER’S WEALTH IS FROM INVESTMENTS, SAYS ACCOUNTANT
A BRITISH ASIAN accountant who examined Rishi Sunak’s tax returns on behalf of Eastern Eye has estimated the prime minister might be worth “£50 million to £100m”.
A summary of Sunak’s tax returns for the past three years, 2019-2022, was released last week (22) by his financial advisers, Evelyn Partners.
They show that during this period, he paid tax of £1,053,060 on earnings of almost £4.8m.
The accountant told Eastern Eye: “He’s a rich boy, but he has done nothing wrong. His earnings from his salary as an MP and a minister are unremarkable. Most of his money comes from unearned income. To get that kind of capital gains you have to have a lot of investments. No doubt he has good investment advisers.”
He added that it was a matter of luck that Sunak had married Akshata Murty, the wealthy daughter of NR Narayana Murthy, who had very little when he co-founded Infosys, now a global IT giant.
“It’s like Kate Middleton meeting Prince William when they were undergraduates at St Andrew’s University in Scotland – that, too, was a matter of luck,” he commented. “Rishi met his wife when they were students at Stanford.”
The Sunaks were one of five new entries in Eastern Eye’s Asian Rich List for 2022, coming in at number 17 in the roll call of Britain’s 101 wealthiest Asians.
Their net wealth is put at £790m. Much of that is due to Murty’s holding in Infosys. Her dividends come to about £12m a year.
Sunak published his tax returns to show that he is being “transparent”, but 10, Downing Street, chose to release the figures precisely when the nation’s attention was focused on political theatre.
This was when Boris Johnson was being grilled last Wednesday (22) by the Commons privileges committee for over three hours on whether the former prime minister had deliberately misled parliament during “partygate”.
Asked to speculate on Sunak’s reasons for releasing his tax returns when he knew he would be attacked by Labour for allegedly being too rich to understand the struggles of ordinary people coping with a cost of living crisis, the accountant retorted: “Why shouldn’t he? With his wealth, he has demonstrated he does not need to be corrupt.”
During the financial year April 6, 2021, to April 5, 2022, Sunak earned £81,908 as an MP plus £74,225 in ministerial salary. He made £293 in bank interest on his savings account. His investment income was £690 in interest and £172,415 in dividends. His total income came to £329,561, on which he paid tax of £120,604. His foreign earnings are also set out. There was foreign tax of £13,937 in a territory not specified. His capital gains in America came to £1,641,431, on which he paid UK tax of £325,826 at the rate of 20 per cent. Therefore in the year 2021-22, Sunak earned £1,970,992 on which he paid £432,493 in tax.
The corresponding figures were £1,777,581 in earnings and £393,217 in tax in 2020-2021; and £1,018,389 in earnings and £227,350 in tax in 2019-2020.
Predictably, the opposition parties were not impressed by Sunak’s move.
Christine Jardine, the Liberal Democrat Cabinet Office spokesperson, said: “After months of promising to release his tax returns, I don’t understand why Rishi Sunak has snuck them out while the world is distracted with Boris Johnson’s Partygate grilling.”
Angela Rayner, Labour’s deputy leader who has not published her own tax returns, said that Sunak’s “reveal a tax system designed by successive Tory governments in which the prime minister pays a far lower tax rate than working people who face the highest tax burden in 70 years”.
The Financial Times (FT) commented: “The summary – which is only just over two pages long – confirms that Sunak, a former Goldman Sachs banker, is a member of the UK’s super-rich elite...
“Although Sunak’s allies say the prime minister has nothing to hide, revelations about his high income and big investments are politically awkward given the UK is facing a cost of living crisis.”
Sunak’s tax returns do not include the assets held by his wife, whose stake in Infosys is estimated to be worth “more than £500m”, according to the FT.
Chris Etherington, partner at accounting firm RSM, told the FT that the “most interesting thing” about the release was the weighting in favour of investments that produced capital gains, rather than dividends.
“It is understood he does not influence the investment strategy of the blind management arrangement, but it appears he has benefited from the difference in tax rates between capital gains and dividend income,” Etherington said.
A senior tax lawyer, speaking on condition of anonymity, said the prime minister had “sanitised” his personal affairs to exclude assets producing complex income streams, such as property or property funds.
“He’s a wealthy man who has managed his affairs carefully to avoid giving rise to messy or difficult questions,” he said.
The FT also pointed out that “Sunak owns four properties – a family home and apartment in Kensington, a large manor house in Yorkshire with a heated swimming pool, and an apartment in Santa Monica, California.
“While Sunak was chancellor of the exchequer under Johnson, he faced attacks because Murty held ‘non-domiciled’ tax status, which allows some noncitizens to pay tax only on their income earned in the UK.
“Sunak has drawn criticism for publishing a summary from his accountants rather than the actual tax return,” the FT said.
“Nicola Sturgeon published her full tax return – why couldn’t Sunak do the same thing?” commented Dan Neidle, founder of Tax Policy Associates thinktank.
Sunak’s wife has since relinquished the advantages of being a non-dom and has volunteered to pay tax on her global earnings.
In notes provided by Evelyn Partners, it was stated that Sunak was domiciled in the UK and had always filed his tax returns on that basis. He is therefore taxable in the UK on his worldwide income and gains.
Evelyn Partners told their client (Sunak): “We can confirm that your previously held Green Card status did not impact your tax liability in either the UK or the USA during this period. This is because you were considered non-resident for US tax purposes. Therefore, the only income or gains that were taxed in the USA were the US source dividends. Please note that US source dividends are taxable in the USA for any non-US resident. As noted above, you are taxable in the UK on your worldwide income and gains, therefore, these US dividends were also subject to tax in the UK.”
The Labour leader, Sir Keir Starmer, followed Sunak by releasing his returns. Over two years, Starmer earned a total of almost £275,000, just under £22,000 of which came from legal fees in 2020-21 and £543 from book royalties in 2021-22. He also gained just under £100,000 when his sister sold a property that he had helped her buy for her family to live in. In total, he paid £118,580 in income tax and capital gains tax on these earnings.
Starmer said Sunak’s returns highlighted the unfairness of the UK tax regime, where capital gains are taxed at a much lower rate than income. “There’s a wider point about choices here,” he said. “The choices they’ve made on tax and the tax system are obvious. They always go after working people – just look at
the last 12 months.”