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0 Nadhim Zahawi, chair of Britain’s ruling Conservative party, is facing a chorus of questions about his tax affairs after he failed to confirm or deny reports he has agreed to pay millions of pounds in tax to settle a dispute with HM Revenue & Customs.
When Zahawi was asked by reporters last July about a story that he was being investigated over his finances, the then chancellor said he was the victim of a “smear”.
“I was clearly being smeared, I was being told that the Serious Fraud Office, that the National Crime Agency, that HMRC are looking into me,” he told Sky News at the time. “I’m not aware of this.”
The allegation surfaced when the Stratford MP made an unsuccessful bid to become the next prime minister after the resignation of Boris Johnson.
This week Zahawi has refused to answer detailed questions about a report in The Sun on Sunday at the weekend that he was settling a dispute with HMRC with a multimillion-pound payout.
Asked whether Zahawi had made or would be making the payment, what it was for, how much it was worth and when he became aware that HMRC was looking into his tax affairs his spokesperson issued a statement saying that his tax affairs were “fully up to date and paid in the UK”.
It added: “Mr Zahawi has always said that he will answer any questions from HMRC, which he has always done.”
When asked about Zahawi’s tax affairs in parliament on Wednesday, Rishi Sunak said there was nothing further to add. “My honourable friend has already addressed this matter in full,” the prime minister added.
But the Labour party insisted Zahawi and Sunak had further questions to answer around whether there had been an investigation and, if so, when they had become aware of it.
The Kurdish-born former businessman — who moved to the UK as a child — made his estimated £100mn fortune as co-founder of YouGov, a polling company, before becoming MP for Stratford-upon-Avon in 2010.
A Gibraltar-based company called Balshore Investments, described in YouGov annual reports as “the family trust of Nadhim Zahawi”, held a 40 per cent stake in the company that was worth more than £20mn before it was sold down by 2018.
Dan Neidle, founder of think-tank Tax Policy Associates, has suggested that if the sale had been liable for capital gains tax in the UK, it would have been worth £3.7mn to the exchequer.
Zahawi said last summer he had never had an interest in Balshore Investments, or any trust associated with it, and that neither he, his wife nor their children were beneficiaries. Instead, a spokesperson said his father, Hareth Zahawi, who lives abroad, owned Balshore.
However, Neidle’s investigation into Zahawi’s tax affairs last year revealed that he received a payment of £99,000 from Balshore Investments in 2005, contrary to his claims that he had never benefited directly from the trust.
“It can’t be right that he can make this all go away by refusing to comment. Either there was a serious conflict of interest [when Zahawi was chancellor] or there wasn’t and he needs to explain,” he said.
Angela Rayner, deputy Labour leader, has this week issued written questions to the government about the procedures around Zahawi’s original appointment as chancellor.
Rayner asked whether the Cabinet Office had received any written communications from the propriety and ethics team regarding Zahawi at the time, as reported by the Observer newspaper last summer.
She also asked whether any discussions took place between HMRC and the propriety and ethics team when ministers — including Zahawi — were appointed in 2022. Rayner has also asked whether the Cabinet Office’s department provided any legal assistance to cabinet ministers between January 2022 and January 2023.
The Cabinet Office told the Financial Times: “The Ministerial Code sets out the process by which Ministers, following their appointment to a new role, should declare and manage their interests.”
Tax experts said that if press reports last year that NCA and SFO officials had secretly investigated Zahawi were correct, it would have been linked to potential financial crime rather than the tax affairs of the MP and Balshore, because the two agencies do not investigate tax. The reported investigations did not lead to any action by the two agencies, according to the articles.
A spokesperson for Zahawi said: “Mr Zahawi is not aware of any investigation by the NCA and no allegations of financial crime have ever been put to him. To suggest otherwise would be seriously false and defamatory.”
Edward Troup, former executive chair of HMRC, said HMRC would normally accept payment of tax, interest and penalties to settle avoidance disputes, and could invoke additional powers regarding taxpayers in positions of responsibility.
The NCA said it “does not routinely confirm or deny the existence of investigations, or those who may or may not be subject to them.”
An SFO spokesperson said: “At this time I can neither confirm nor deny whether there is any investigation into Nadhim Zahawi’s financial affairs.”
HMRC said: “We cannot comment on identifiable taxpayers.”
