Nadhim Zahawi fails to address fine but says tax error ‘careless not deliberate’

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Nadhim Zahawi has released a statement on the recent “confusion about his finances”, in which he fails to provide details of a “million pound” fine he is reported to have paid to the taxman.

The Tory party chair is under pressure after it was claimed he had paid a penalty of more than £1m to settle an investigation into his tax affairs.

The former chancellor admitted he paid a tax settlement after HM Revenue & Customs disagreed with the allocation of founder shares his father took when he set up YouGov.

He does not address reports of a penalty or how much he was fined to settle any probe into his tax affairs amid mounting questions over his personal payments to HMRC.

Labour said the statement “blows a hole” in his previous accounts and raises more questions.

The Liberal Democrats have called for an independent investigation.

The news that Mr Zahawi was forced to pay a penalty – part of a reported total tax settlement of almost £5m – came as The Independent revealed he tried to gag this newspaper from revealing that he was being investigated by the National Crime Agency and HMRC last year.

The statement, released on Saturday afternoon, said: “As a senior politician I know that scrutiny and propriety are important parts of public life. Twenty-two years ago I co-founded a company called YouGov. I’m incredibly proud of what we achieved. It is an amazing business that has employed thousands of people and provides a world-beating service.

“When we set it up, I didn’t have the money or the expertise to go it alone. So I asked my father to help. In the process, he took founder shares in the business in exchange for some capital and his invaluable guidance. Twenty one years later, when I was being appointed chancellor of the exchequer, questions were being raised about my tax affairs. I discussed this with the Cabinet Office at the time.”

Labour called on the prime minister to sack Mr Zahawi, with Debuty Leader Angela Rayner describing his position as “untenable”.

The Sun on Sunday reported that he had settled a tax dispute relating to an offshore company registered in Gibraltar to hold shares in the polling company that he co-founded, YouGov.

YouGov’s 2009 annual report showed a more than 10 per cent shareholding by the Gibraltar-registered Balshore Investments Ltd, and described the company as the “family trust of Nadhim Zahawi”. At the time Mr Zahawi was an executive director of YouGov.

Mr Zahawi’s statement went on to add: “Following discussions with HMRC, they agreed that my father was entitled to founder shares in YouGov, though they disagreed about the exact allocation. They concluded that this was a ‘careless and not deliberate’ error.

“So that I could focus on my life as a public servant, I chose to settle the matter and pay what they said was due, which was the right thing to do.

“Additionally, HMRC agreed with my accountants that I have never set up an offshore structure, including Balshore Investments, and that I am not the beneficiary of Balshore Investments. This matter was resolved prior to my appointments as chancellor of the duchy of Lancaster and subsequently chairman of the party I love so much. When I was appointed by the Prime Minister, all my tax affairs were up to date.”

Labour party chairwoman Anneliese Dodds called it a “carefully worded statement”, calling on Mr Zahawi to now publish all correspondence with HMRC.

She added: “In the middle of the biggest cost-of-living crisis in a generation, the public will rightly be astonished that anyone could claim that failing to pay millions of pounds worth of tax is a simple matter of ‘carelessness’.

“Nadhim Zahawi still needs to explain when he became aware of the investigation, and if he was chancellor and in charge of our tax system at the time. He needs to explain why his legal representatives said his affairs were up to date in December last year only for him to settle a million pound fine this month. And he needs to explain why he was using threatening and intimidating legal action to shut down legitimate questions from tax experts last year.

“Rishi Sunak needs to remove Nadhim Zahawi as party chair and set the record straight immediately – including about what he knew about the investigation into Zahawi at the time.”

On Saturday Dominic Raab defended Mr Zahawi. The Deputy Prime Minister told Sky News: “Look, I can’t speak for the personal tax affairs of a colleague, but what I would say is that Nadhim has been very clear that he’s paid all the tax that he’s owed, that he’s paid it on time, that there’s nothing outstanding due, and I think that’s of course right and proper.”

Asked whether he is confident that Mr Zahawi is being open and honest about his tax affairs, Mr Raab said: “Yes, I think he has been in the way I’ve described.”