Zahawi admits he paid settlement after HMRC disagreed with allocation of shares

Nadhim Zahawi has admitted he paid a tax settlement after HM Revenue & Customs disagreed with the allocation of founder shares his father took when he set up YouGov.

The embattled Tory party chairman has been under pressure since it was reported that he paid HMRC a seven-figure sum to end a dispute, with Labour calling for him to be sacked.

Mr Zahawi insisted that his tax error was “careless and not deliberate” and that the matter was resolved before taking up his current post.

The former chancellor released a statement on Saturday to “address some of the confusion about my finances” after reports that he paid a penalty as part of a multimillion-pound tax settlement.

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.

Mr 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.

Murky

Nadhim Zahawi’s statement on his tax affairs “blows a hole” in his previous accounts and raises more questions, Labour has said.

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’.

“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.”

‘Untenable’

Labour had earlier said the Tory chair’s position was “untenable” and called for an explanation after The Guardian reported that Mr Zahawi paid a 30% penalty, taking the estimated total tax bill to more than £4.8 million.

Shadow chancellor Rachel Reeves said: “A few months ago … he was Chancellor of the Exchequer and responsible for Britain’s tax affairs and tax collection, and we now find that he wasn’t so keen to pay himself.

“So if the Prime Minister wants to stick by his commitment for integrity, honesty and professionalism, he should do the right thing and sack Nadhim Zahawi.”

Labour deputy leader Angela Rayner criticised Mr Zahawi’s refusal to comment up until his statement on Saturday, saying: “The fact that Nadhim hasn’t been out on the airwaves explaining himself, to me, adds insult to injury.”

She added: “If he’s lied and misled the public and HMRC regarding his tax affairs then I think his position is untenable.”

Offshore company

Mr Zahawi did not address any penalty, but denied allegations that he avoided tax by using an offshore company registered in Gibraltar 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.”

YouGov’s 2009 annual report showed a more than 10% shareholding by Gibraltar-registered Balshore Investments.

The report described the company as the “family trust of Nadhim Zahawi”, then an executive director of the polling firm.

Mr Sunak has defended Mr Zahawi, telling Prime Minister’s Questions on Wednesday that he had “already addressed this matter in full and there’s nothing more that I can add”.

The spotlight on Mr Zahawi’s tax affairs capped a challenging week for the Prime Minister, who was fined by police for not wearing a seatbelt in the back of a moving car.