Nadhim Zahawi has revealed that tax chiefs found he had made a “careless” rather than “deliberate” error as he settled his tax dispute with a multimillion-pound settlement.
But the Tory party chair also admitted that HMRC had rejected his claim about the amount of money that had been filed in his father’s name.
Mr Zahawi, the former chancellor, made a statement addressing the £5m tax settlement – said to include a “million-pound” fine – on Saturday as he fought for his political life.
The Independent 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 founded 22 years ago.
In his statement, Mr Zahawi, who still attends cabinet, failed to address the reports of a fine directly. He said: “When we set [YouGov] 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.”
Mr Zahawi said that the dispute was settled before he was appointed chancellor of the Duchy of Lancaster and subsequently chair of the Conservative Party.
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 to be held.
Earlier this week, senior Tories warned that Mr Zahawi’s position was “unsustainable”, with one former minister warning: “A judgement needs to be made about whether this storm can be weathered and a line is drawn, or it hangs over the chairman and overshadows [his role].”
Labour also called on the prime minister to sack Mr Zahawi, with deputy leader Angela Rayner describing the former chancellor’s position as “untenable”.
Last week The Sun on Sunday reported that Mr Zahawi had settled a tax dispute relating to an offshore company, registered in Gibraltar, that had held shares in YouGov.
Reacting to Mr Zahawi’s statement on Saturday, Labour Party chair Anneliese Dodds described it as “carefully worded” and called on him 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.”
The Independent revealed that Mr Zahawi had tried to prevent the publication of an article exposing the investigation into his tax affairs by repeatedly threatening to sue if it was published.
Mr Zahawi, who was chancellor at the time, said he would “one hundred per cent” take legal action.
On Saturday, the deputy prime minister, Dominic Raab, defended Mr Zahawi, telling 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.”
