The boss of HMRC has suggested Nadhim Zahawi did not make an "innocent error" amid a toxic row over the Tory Chairman's tax affairs.
The comments come as the Cabinet minister clings to his role in Government after Rishi Sunak ordered an investigation by his ethics adviser.
Yesterday the Prime Minister was forced to endure mockery in the Commons and was branded "hopelessly weak" for failing to sack the senior Tory.
Mr Zahawi has said a "careless but not deliberate" error had been made, relating to shares in YouGov, the polling company he co-founded.
In a statement at the weekend, he confirmed he had agreed to a settlement - estimated to be worth around £5million, including a penalty - while he was Chancellor in the dying days of Boris Johnson's Government.
Mr Zahawi has given HMRC approval to speak to the investigation into his tax affairs, a source close to the Tory chairman said.
Appearing in front of MPs on Thursday the permanent secretary at the tax office Jim Harra was asked what HMRC means when someone has been "careless".
He explained: "I'm not commenting on any particular person's affairs but carelessness is a concept in tax law.
"There are no penalties for innocent errors in your tax affairs.
"So if you take reasonable care but make a mistake whilst you will be liable for the tax and for interest if it's paid late you would not be liable for a penalty.
"If your error was as a result of carelessness, the legislation says a penalty could apply in those circumstances."
Mr Harra also told MPs on the Public Accounts Committee that if his officials at HMRC are asked they would assist the probe into Mr Zahawi.
"If we are asked by the independent adviser on ministerial interests to help with the inquiry, we will do so in any way we possibly can", the tax boss said.
Mr Harra also said that he could not comment on an individual's tax affairs, but signalled that HMRC could potentially offer a more public comment on a minister's tax affairs under certain circumstances.
He said: "Taxpayers can consent for HMRC to share details of their tax affairs with other people and that's normal, for example, when they have an agent.
"However, it would still not be normal for HMRC to publicly comment on someone's tax affairs even if they had said that it was OK for us to do so."
Seizing on the comments the Liberal Democrat Deputy Leader Daisy Cooper said: "Rishi Sunak must rule out another Conservative Party stitch up.
"If Nadhim Zahawi refuses to allow HMRC to assist in this inquiry, Sunak should sack him on the spot."
“The public are sick and tired of toothless investigations letting Conservative ministers off the hook."
A spokesman for the Prime Minister said: "I would point back to what the PM said in the House of Commons yesterday which is that he's asked for an investigation to establish the facts in relation to whether there's been a breach of the ministerial code.
"The independent adviser will establish the facts and provide advice to the PM and then he will obviously consider next steps. I obviously can't pre-empt that. It is right that the independent adviser is allowed to continue with that work."
They added that Mr Harra was "speaking more generally about tax policy".
On Thursday Phillip Hammond - Chancellor during Theresa May's Government - also told Sky News he would not have accepted the role if he was being investigated by the tax office.
"My own personal view is that I would not want to accept the office of Chancellor if I was at the time involved in a live negotiation of an outstanding tax case with HMRC," he said.
