Labour has called for an inquiry into whether Nadhim Zahawi broke the ministerial code or misled the public over his tax affairs during his time as chancellor.
Anneliese Dodds, the chair of the Labour party, wrote to Rishi Sunak on Wednesday saying there should be an inquiry if Zahawi, the Conservative party chair, does not fully explain why he paid millions of pounds in tax to HMRC.
Sunak came under pressure about Zahawi’s tax affairs at prime minister’s questions, and told MPs that the Tory minister had “already addressed this matter in full”.
The prime minister was asked by the Labour MP Alex Sobel whether he had been aware of any questions from HMRC when he appointed Zahawi to his cabinet and as Tory party chair.
“Will the prime minister demand accountability from his cabinet members about their tax affairs?” Sobel asked.
Sunak’s official spokesperson said Zahawi “has spoken and been transparent with HMRC”, despite his refusal to answer specific questions. She added: “I don’t know whether the prime minister has reviewed it in full, but I do know that he takes Nadhim Zahawi at his word.”
Asked if Sunak was confident he knew everything he needed to know about the affair, she responded “yes” and said he had full confidence in Zahawi.
Zahawi has not denied a report in the Sun on Sunday that he paid millions in tax related to his business interests to HMRC, after questions were raised about whether he should have paid capital gains tax on his founding share in YouGov. This was held and sold when it was worth about £20m in 2018 by a Gibraltar-based firm, Balshore Investments, ultimately owned by his parents.
But a spokesperson for Zahawi said on Wednesday: “Mr Zahawi’s tax affairs were and are fully up to date and paid in the UK. Neither he nor his direct family are beneficiaries of Balshore Investments or any trust associated with it.
“Mr Zahawi has always said that he will answer any questions from HMRC, which he has always done.”
It is not clear whether Zahawi approached HMRC to declare an underpayment, or the tax authorities launched an investigation, and whether any penalties were applied. It is also unknown whether a formal investigation was launched by HMRC and whether Zahawi was in any discussions with the tax authorities when he was chancellor from July to September last year.
Dodds said the allegations around Zahawi were “deeply concerning”, especially in light of his claim in July last year that he had paid his taxes in full.
“If he has not been straight with the British people, or with HMRC, he should have no place in the government,” she said. “What is even more concerning is that Rishi Sunak, the man who promised honesty, integrity and accountability on the steps on No 10, was happy to appoint Nadhim Zahawi to his cabinet. Zahawi needs to come clean about his tax affairs. Sunak needs to come clean about what he knew about this investigation and when.”
In her letter to Sunak, Dodds asked him to confirm publicly that a “red flag” was raised by the Cabinet Office on Zahawi’s appointment as chancellor in the summer over his tax affairs, and she asked what assurances the government received from Zahawi at that point.
Dodds has also pressed Sunak to say whether Zahawi has provided answers to how much he has agreed to pay HMRC, why he claimed he had paid his taxes in full, and when he was made aware of HMRC’s interest in his tax affairs, among other questions.
“If answers to these questions have not been provided, can you confirm that a full cabinet inquiry will take place to determine if Mr Zahawi has misled the British public and broken the ministerial code? And if that inquiry finds that he did, will you remove him from post immediately?” she wrote.
Zahawi has been approached for comment.
The Liberal Democrats demanded that the government’s ethics adviser investigate. The party’s deputy leader, Daisy Cooper, said: “Rishi Sunak must order an investigation by his ethics adviser into any potential conflict of interest posed by this case during Zahawi’s time as chancellor.
“There was a vacuum of accountability during the summer when there was no ethics adviser in post. It’s only right this is properly looked into. The public deserves full transparency, not another Conservative cover-up. Anything less would make a mockery of Sunak’s promise to govern with integrity.”
