Nadhim Zahawi: My tax error was careless, not deliberate

Nadhim Zahawi has said HMRC told him he made a “careless and not deliberate” error in the arrangement of his tax affairs.

The embattled Conservative chairman released a statement on Saturday amid reports that he paid the taxman millions.

In the statement, Mr Zahawi said he wanted to “address some of the confusion about my finances in the media”.

“As a senior politician, I know that scrutiny and propriety are important parts of public life,” he said. “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.

“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.”

It come after Dominic Raab, the Deputy Prime Minister, failed to guarantee Mr Zahawi’s political future amid the continuing scrutiny of his tax affairs.

Asked whether the party chairman would still be in his job in a month, Mr Raab, who is also the Justice Secretary, replied: “A month’s a long time in politics. I certainly hope so.”

He told Sky News: “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, there’s nothing outstanding due and I think that’s of course right and proper.”

It has been reported that Mr Zahawi agreed to pay a penalty of more than a million pounds to the taxman – something that has not been denied by the former chancellor’s press team.

Penalties can be required by the taxman for a variety of reasons, including when a “lack of reasonable care” with payments has been taken, according to HMRC guidance.

Asked whether Mr Zahawi had paid a penalty, Mr Raab said: “I don’t know. I’m not responsible for his personal tax affairs. You can ask him that question.”

He said Mr Zahawi had “done a great job as a government minister” but acknowledged that his tax affairs were “a legitimate point of scrutiny”, adding: “If there’s further questions I’m sure there will be the proper transparency.”

‘Position now untenable’

Mr Zahawi has been left fighting for his future after it was reported that he agreed to pay millions of pounds to HMRC relating to shares he kept in an offshore family trust. He has faced questions since last summer about why shares from YouGov were kept in Balshore Investments, a Gibraltar-registered family trust.

Tax experts have estimated that the capital gains tax incurred by the sale of multiple tranches of shares in YouGov by Balshore Investments was about £3.7 million. The Guardian reported on Friday that Mr Zahawi had agreed to pay a penalty of around 30 per cent of that amount – around £1.1 million – in a settlement reached late last year.

Angela Rayner, the Labour deputy leader, has said Mr Zahawi’s position was “now untenable” and that Rishi Sunak should dismiss him from the Cabinet.

Her call for Mr Zahawi to go was repeated on Saturday morning by Rachel Reeves, the shadow chancellor.

After a speech at the Fabian Society in London, Ms Reeves said: “Dominic Raab, who’s being investigated for bullying, is passing judgment on Nadhim Zahawi, who’s just had a £1 million fine for not paying his taxes on time. That pretty much epitomises this Conservative Cabinet.

“A few months ago, [Mr Zahawi] was Chancellor of the Exchequer… and responsible for Britain’s tax affairs and tax collection, and we now find that he wasn’t so keen to pay himself. So if the Prime Minister wants to stick by his commitment for integrity, honesty and professionalism, he should do the right thing and sack Nadhim Zahawi.”

In the Sky News interview, Mr Raab also said Mr Sunak did not need to resign after being fined £100 for not wearing a seatbelt while filming a social media clip in the back of a moving car.

It is the second time Mr Sunak has been issued with a fixed penalty notice, having been fined last year in relation to Boris Johnson’s “birthday party” on June 19, 2020, while lockdown restrictions were in place.

Asked whether Mr Sunak should consider his position, Mr Raab said: “No, I don’t think so if you look at the context of it, or indeed the context of the earlier fine, which was very much for inadvertent behaviour.

“The Prime Minister has been very clear – he says it was a mistake, he’s put his hand up, people want that kind of honesty, he’s apologised, he’ll pay the fine. It was an inadvertent mistake and it shouldn’t have happened, and he’s been very clear about that.

“Given the circumstances I don’t think it’s something which would result in his resignation.”