Infosys acknowledges £20m tax dispute with HMRC

Indian IT services company Infosys is disputing a corporate tax assessment by UK tax authority HM Revenue and Customs, according to the company’s annual report.

A company spokesperson said in an official statement: “Infosys provides details of certain ongoing disputes with various regulatory authorities, including this specific tax matter with HMRC.

“The company has filed an appeal against a tax assessment in the UK and obtained a stay on the payment of the tax demand from HMRC,” the spokesperson added.

The Bengaluru-based company’s annual report acknowledges the tax dispute with HMRC, first reported by The Times on Monday, January 30. Infosys also acknowledged another dispute over tax in Australia.

However, there is no suggestion of any wrongdoing by the Indian software company. Nevertheless, the HMRC dispute has political ramifications given the company’s UK connections and the dispute has been revealed at a sensitive time for Rishi Sunak’s government.

Many companies are involved in similar disputes with tax authorities around the world, but not every company has a family connection to a head of government. NR Narayana Murthy, who founded Infosys in 1981, is father-in-law to Prime Minister Sunak.

Although Murthy stepped down from Infosys in 2014, his daughter Akshata Murty still owns 0.9% of the company. This stake is worth an estimated £730 million ($900 million), paying out approximately £3 million a year in dividends.

Murty came under scrutiny from the UK media in April 2022 when it was revealed that she claimed non-domiciled tax status to reduce her tax bill. This included taxes paid on Infosys dividends.

She later gave up her non-domiciled status.

Meanwhile, the Sunak government has already been rocked by a tax scandal this year. Nadhim Zahawi was removed as Conservative Party chairman on Sunday, January 29, after an investigation found he had breached the ministerial code of ethics in his tax affairs.

HMRC had reached a £5 million settlement with Zahawi over capital gains tax owed from the sale of £20 million worth of shares from YouGov, a polling company he helped found in 2000, held by an offshore trust in Gibraltar.

This settlement included back taxes of £3.7 million and a 30% late payment penalty. Zahawi had threatened to sue Dan Neidle, director of Tax Policy Associates, for his analysis of the financial arrangements. But the member of Parliament for Stratford withdrew the threat of legal action.