UK Conservative Party chairman Nadhim Zahawi. has admitted he had paid a penalty for a tax error, but has insisted that it was “careless and not deliberate.”
The former chancellor, who attends Rishi Sunak’s Cabinet, has been under pressure since the Sun on Sunday revealed the tax dispute. He allegedly avoided tax by using Balshore Investments, an offshore company registered in Gibraltar, to hold shares in the polling company he co-founded, YouGov.
The main opposition Labour Party said Zahawi’s position is “untenable” after The Guardian reported that Zahawi paid HM Revenue & Customs (HMRC) a 30 percent penalty, which was a seven-figure sum.
Zahawi released a statement on Saturday to “address some of the confusion” about his finances.
He said that when he set up the YouGov polling company in 2000, his father took founder shares.
He added: “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.”
Zahawi said the matter was resolved and “all my tax affairs were up to date” when Prime Minister Rishi Sunak appointed him as party chairman.
He did not address any penalty, but denied allegations that he avoided tax by using Gibraltar-registered offshore company Balshore to hold shares in YouGov.
He said: “HMRC agreed with my accountants that I have never set up an offshore structure, including Balshore Investments, and that I am not the beneficiary of Balshore Investments.”
Zahawi’s explanation has failed to convince opposition parties, who said important facts had been left out and demanded an independent probe.
Labour Party chairwoman Anneliese Dodds said: “This carefully worded statement blows a hole in Nadhim Zahawi’s previous accounts of this murky affair. He must now publish all correspondence with HMRC so we can get the full picture.
“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.’”
Labour questioned whether Zahawi settled the tax dispute while in charge of HMRC during his brief stint as chancellor last year.
Dodds said: “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.”
She added: “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 have called for an independent investigation into Zahawi’s tax affairs.
Lib Dem deputy leader Daisy Cooper said: “Zahawi and his Conservative Cabinet colleagues are arrogantly trying to brush this under the carpet.
“There are facts that still need to be established so there must be an independent investigation to get to the bottom of this. The British public has lost all faith in Conservative ministers to tell the truth after years of scandal.
“The public will be rightly suspicious of the whole saga surrounding Zahawi’s tax affairs. Rishi Sunak is proving powerless to stop the daily drip-feed of sleaze from the top of Government.”
Sunak defended Zahawi earlier, telling Prime Minister’s Questions on Wednesday that Zahawi “has already addressed this matter in full and there’s nothing more that I can add.”
The prime minister’s press secretary said Zahawi “has spoken and been transparent with HMRC.”
A spokesperson for HMRC said that it could not comment on identifiable taxpayers. But Labour suggested that an inquiry might be required to look into the matter and the party has submitted a series of questions to HMRC seeking clarity over the allegations.
In a letter to HMRC, Angela Rayner, Labour deputy leader, said: “I understand that HMRC’s position is that you do not comment on the tax affairs of individuals. However, given the public interest in this case as well as the serious questions raised about a potential conflict of interest at the heart of government, the public require answers.
“In particular, there appears to be an element of special treatment directed towards Nadhim Zahawi by HMRC,” she claimed.
PA Media contributed to this report.