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

Get real time updates directly on you device, subscribe now.

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 had paid a tax settlement after HM Revenue and Customs disagreed with the allocation of founder shares his father took when he set up YouGov.

The statement does not address reports of a penalty, or reveal how much Mr Zahawi was fined in order to settle any investigation into his tax affairs, amid mounting questions over his personal payments to HMRC.

Labour said the statement “blows a hole” in the minister’s previous accounts of the situation, and that it 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 Independentrevealed he had tried to stop it from reporting that he was being investigated by the National Crime Agency and HMRC last year.

Mr Zahawi’s 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 deputy leader Angela Rayner describing the former chancellor’s position as “untenable”.

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

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: “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 chair Anneliese Dodds described it as a “carefully worded statement”, calling on Mr Zahawi to publish all related 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.”