Tory leadership candidate Nadhim Zahawi has fallen under scrutiny on account of his finances, which have been investigated by both the National Crime Agency and Serious Fraud Office.
The new chancellor is believed to be one of the richest politicians in the House of Commons, with an estimated net worth of up to £100 million.
Mr Zahawi has been lauded as a modern British success story. Born in Baghdad to a Kurdish family, he and his family were forced to flee Saddam Hussein’s reign during the 1970s and took refuge in the UK. In 2000, he founded the polling company YouGov, before becoming a Tory MP for Stratford-on-Avon in 2010.
However, following multiple revelations by The Independent and other newspapers, questions are now being asked over Mr Zahawi’s wealth and how it has been accumulated.
Mr Zahawi insists he is “clearly being smeared” and has “always paid my taxes”.
Here’s what we know
Despite founding YouGov in 2000, alongside Stephan Shakespeare, Mr Zahawi never openly held shares in the company.
Instead, according to YouGov’s first Companies House return, Mr Shakespeare held 42.5 per cent of the share capital, Neil Copp held 15 per cent, while 42.5 per cent was held by Balshore Investments Limited – a company incorporated in Gibraltar.
Dan Neidle, head of the think tank Tax Policy Associates, said “the central mystery is why Zahawi, one of the key founders of YouGov, held no founding shares in it. The other two founders did. The shares you'd have expected Zahawi to hold were instead issued to a Gibraltar company, Balshore investments Limited. This appears to be owned by an offshore trust controlled by Zahawi's parents.”
A YouGov annual report from 2009 says “Balshore Investments is the family trust of Nadhim Zahawi, an executive director of YouGov plc”. The trust held the shares for at least seven years after Zahawi became an MP in May 2010, earning dividends of hundreds of thousands of pounds.
Overall, Balshore owned a stake in YouGov worth more than £20 million but had sold it by 2017-18.
Mr Zahawi has said he has never had an interest in Balshore Investments and that neither he, his wife, nor their children are beneficiaries. Instead, a spokesperson said that his father, Hareth Zahawi, who does not live in the UK, owned Balshore.
Such an arrangement has stirred suspicions. Mr Neidle believes the “obvious conclusion from the peculiar shareholdings” is that Mr Zahawi engineered for his family’s trust to hold the shares that otherwise would have gone to him, as the founder.
“Absent any explanation from Zahawi, I can only conclude this was done to ensure that dividends and gains on those shares were not taxed. If that's right, it's a very aggressive structure... This is not normal tax planning.”
A spokesperson for Mr Zahawi said: “Any suggestion that Mr Zahawi has engaged in either tax evasion or tax avoidance through the use of offshore structures would be false.”
A government source said that at the time Mr Zahawi co-founded YouGov, he was not in a position to contribute start-up capital. His father therefore provided start-up capital and took a shareholding in YouGov through Balshore Investments, the source said.
The Observer has reported that Mr Zahawi did not disclose the family trust on the parliamentary register of interests when he became an MP.
Beyond YouGov, Mr Zahawi and his wife, Lana Saib, have built an extensive property portfolio, with purchases including a London townhouse, high street properties and an industrial estate.
Another Gibraltar company, Berkford Investments Limited, was used to buy Mr Zahawi’s house in 2011. Neither Mr Nadhim nor his wife derived any tax benefit from this loan, which cannot be characterised as an offshore tax structure, the government source said.
Zahawi under investigation
The Independent reported last week that Mr Zahawi’s finances had been secretly investigated by the National Crime Agency (NCA) in 2020.
A senior serving Whitehall figure revealed that a number of individuals had been formally approached by officials from the NCA about the matter.
The NCA said it was seeking information about Mr Zahawi’s finances, the source said. The inquiry was codenamed “Operation Catalufa” and is understood to have involved the agency’s International Corruption Unit.
Whitehall officials were told the inquiry was top secret and that Mr Zahawi had not been informed about it. The NCA inquiry did not lead to any action against Mr Zahawi. There is no suggestion of wrongdoing by him.
The Independent also established that officers from the Serious Fraud Office (SFO) have investigated the chancellor’s financial affairs.
The probe was then passed to HM Revenue and Customs, which falls under the control of the Treasury – the department that Mr Zahawi now runs. A senior Whitehall source confirmed that the tax investigation is currently “unresolved”.
It has also emerged that Boris Johnson, home secretary Priti Patel and the Cabinet Office were all informed of the investigations.
According to The Observer, civil servants in the Cabinet Office’s propriety and ethics team are said to have alerted Boris Johnson to an HMRC “flag” over Mr Zahawi before his appointment. The PM appointed him despite possible concerns over his tax affairs.
What has Mr Zahawi said?
The chancellor has said he would publish his tax return annually if he becomes Tory leader. “I will publish my accounts annually. That's the right thing to do,” he said.
He also told Sky News he was being “smeared” over his tax affairs.
“I was clearly being smeared. I was told that the Serious Fraud Office, the National Crime Agency, HMRC, were looking into me.
“I’m not aware of this. I've always declared my taxes – I've paid my taxes in the UK.”
He said he would “look at what the options are in terms of backdating and publishing annually”, but added he would not release his tax returns from over the last decade. “If I am prime minister, I will publish them going forward.
“I don't think being retrospective is right. I was in business before, I came out of that, of course, now I'm in politics.”
