Tory chairman Nadhim Zahawi has been “open” about his tax affairs and will remain in his role next week despite calls for him to be sacked, said foreign secretary James Cleverly.
Mr Zahawi revealed that HMRC found he had made a “careless” rather than “deliberate” error with his taxes after he reportedly paid a close to £5m – said to include a penalty of around £1m – to settle the dispute.
The Independent first revealed last July that Mr Zahawi was subject to an investigation by HMRC linked to the sale of shares in polling company YouGov, which he co-founded 22 years ago.
But Mr Zahawi’s statement on Saturday has raised further unanswered questions – including the reason for the reported penalty and whether Mr Zahawi negotiated the settlement when he was chancellor and in charge of taxation.
Despite unanswered questions, Mr Cleverly insisted that Mr Zahawi had “admitted to making a careless error” and had submitted to a “higher level of disclosure than other people might do”.
The foreign secretary told Sky News’ Sophy Ridge on Sunday: “I totally understand public figures should be open … He has been more open than others would be. The fact this is in public domain the is something you would normally expect.”
Asked whether Mr Zahawi will survive in his role going into PMQs on Wednesday, Mr Cleverly said: “What else am I going to say other than yes? Because he’s a very, very effective minister.”
Mr Cleverly said he was unable to provide any details on Mr Zahawi’s tax affairs – or what conversations ministers and officials may have had about the matter – because he was carrying out his duties as foreign secretary and “doing some shopping” on Saturday.
He evaded questions over whether Nadhim Zahawi negotiated his tax settlement with HMRC while he was serving as chancellor, or what Rishi Sunak knew when he appointed him party chairman. “I’m not an investigator,” he said. “I don’t know more than is in his statement.”
“Nadhim was a senior member of cabinet. When you join cabinet, the Cabinet Office ensures you go through a due diligence process,” he said. “That is the right and proper role of the Cabinet Office.”
Mr Zahawi, who attends Mr Sunak’s Cabinet, did not disclose the size of the settlement – which The Guardian reported to be an estimated £4.8m including a 30 per cent penalty – or confirm whether he paid a fine.
Tax lawyer Dan Neidle, who has been working to expose the minister’s tax affairs, estimated that he owed £3.7m capital gains tax on those shares, which were eventually sold for £27m.
Mr Zahawi denied allegations that he avoided tax by using an offshore company Balshore Investments, registered in Gibraltar to hold shares in YouGov.
In an unusual move, Mr Zahawi did not take founder shares when he set up YouGov, saying in his statement that his father took shares “in exchange for some capital and his invaluable guidance”.
Mr Zahawi said that “questions were being raised about my tax affairs” when he was being appointed chancellor by Boris Johnson in July, saying he had discussed it with the Cabinet Office at the time. But the exact timing of the settlement with HMRC is still unclear.
He stated: “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 … I chose to settle the matter and pay what they said was due.”
HMRC agreed that he had never set up an offshore structure, including Balshore Investments, “and that I am not the beneficiary of Balshore Investments,” Mr Zahawi said.
Labour has called on the PM to sack Mr Zahawi. Angela Rayner, the party’s deputy leader, said: “The position of the man who was until recently in charge of the UK’s tax system and who this prime minister appointed Conservative Party chair is now untenable.”
Labour party chairwoman Anneliese Dodds added: “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.
“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.”
The Liberal Democrats’ deputy leader Daisy Cooper joined calls for a thorough investigation. “Zahawi and his Conservative cabinet colleagues are arrogantly trying to brush this under the carpet … There must be an independent investigation to get to the bottom of this.”
Sir Iain Duncan Smith suggested Mr Zahawi should provide the “facts” of his tax affairs, saying the Tory chair should “get it all out now” when asked about the controversy on the BBC.
“The sooner you can get the facts out the better, rather than having them all come out in phases,” said the former Tory leader. “I would say to him if he was here now, ‘Get it all out now – whatever you have to do to clear it all up’.”
One former Tory minister said told The Independent Mr Zahawi’s position was “unsustainable”, because the former chancellor would be asked about his tax affairs every time he appeared in public.
Downing Street said it had nothing to add to Mr Zahawi’s statement and confirmed that the PM had confidence in him as Tory chairman.
