It comes after questions were asked over whether the mega-rich Tory chairman, 55, avoided tax by using an offshore company to hold shares in YouGov — the polling company he co-founded.
His family trust, Gibraltar-registered Balshore Investments, held a stake worth more than £20million but sold up by 2018. Mr Zahawi has said he was not a beneficiary of the trust but records show money he owed to YouGov was partly repaid from Balshore dividends.
Think-tank Tax Policy has estimated that Balshore’s sale of YouGov shares should have incurred capital gains tax of around £3.7million.
A spokesman for Mr Zahawi, who is worth more than £100million, said he had “never had to instruct any lawyers to deal with HMRC on his behalf”. They added: “As he has previously stated, his taxes are properly declared and paid in the UK.”
HMRC said: “We cannot comment on identifiable taxpayers.”
“ Sources said his representatives will stump up the seven-figure sum to settle a dispute with HMRC.”
Good - if he has to pay millions in CGT, then he must have made a tidy profit on the shares or capital assets he sold.
If we all have to pay CGT on any Capital Gains above our annual allowance, then rich folk and politicians should not be able to wriggle out of paying them too.
Tory Party chairman Mr Zahawi said the mistake had been accepted by HMRC as “careless and not deliberate”.
In a statement released on Saturday, Mr Zahawi said: "As a senior politician I know that scrutiny and propriety are important parts of public life. Twenty-two years ago I co-founded a company called YouGov. I’m incredibly proud of what we achieved. It is an amazing business that has employed thousands of people and provides a world-beating service.
"When we set it 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.
“Additionally, 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. This matter was resolved prior to my appointments as chancellor of the duchy of Lancaster and subsequently chairman of the party I love so much. When I was appointed by the prime minister, all my tax affairs were up to date.”
On a visit to a hospital in Northamptonshire, Mr Sunak told reporters: "Integrity and accountability is really important to me and clearly in this case there are questions that need answering.
“That’s why I’ve asked our independent adviser (see below) to get to the bottom of everything, to investigate the matter fully and establish all the facts and provide advice to me on Nadhim Zahawi’s compliance with the ministerial code.”
He added that Mr Zahawi would remain Tory Party chairman during the investigation and had agreed to “fully cooperate”.
In a statement, Mr Zahawi said he welcomed the investigation and looked forward to “explaining the facts of this issue” to Sir Laurie Magnus, the prime minister’s independent adviser on minister’s interests.
He added: “In order to ensure the independence of this process, you will understand that it would be inappropriate to discuss this issue any further, as I continue my duties as chairman of the Conservative and Unionist Party.”
Historic England chairman Sir Laurie Magnus (1) will be responsible for advising Mr Sunak on whether government ministers are complying with their code of conduct.
However, the prime minister is the ultimate arbiter of the code, meaning Mr Sunak will have the final say on whether ministers have broken the rules and will decide on any subsequent punishments.
(1) A baronet and former merchant banker who serves on half a dozen quangos and whose long business career involved links with disgraced retail tycoon Sir Philip Green and the late tycoon Robert Maxwell.
I’m sure that the investigation will be thorough and the findings accurate …
PM Rishi Sunak dismisses Conservative Party chair Nadhim Zahawi following weeks of revelations about his tax affairs
The prime minister says it is “clear that there has been a serious breach of the Ministerial Code”
Rishi Sunak ordered an investigation after it emerged Zahawi paid a penalty to HMRC while he was chancellor, over previously unpaid tax
The investigation, led by independent ethics adviser Sir Laurie Magnus, found that Zahawi failed to meet the requirements of the Ministerial Code
Specifically, the investigation found that Zahawi failed to declare that HMRC were investigating his taxes as a conflict of interest when he became chancellor
Zahawi also failed to declare that he paid a penalty to HMRC when he was appointed to Liz Truss and then Rishi Sunak’s cabinet, the investigation found
In Zahawi’s letter responding to his sacking, he told Sunak to expect his “full support” from the back benches
Zahawi didn’t tell Truss or Sunak about HMRC penalty
Nick Eardley
Chief political correspondent
This report is highly critical of Nadhim Zahawi’s failure to declare the HMRC investigation earlier.
He didn’t declare it when appointed education secretary.
He didn’t declare it when he was first made chancellor (although he did later that month).
After settling a tax bill, which included a penalty, he didn’t declare that to Liz Truss or Rishi Sunak when they made him a minister.
That’s why it concludes there was a serious breach of the rulebook ministers have to follow.
There are only two ‘careless’ aspects to Zahawi’s attempts at dodging capital gains tax. The first is that it was careless to set up an offshore ownership of the shares in YouGov that was not watertight. That was careless / stupid. The second is that he couldn’t care less that he attempted to defraud HMRC of rightfully due tax. Literally could not care less.
Except Zahawi was not “manipulating money” - he was trying to avoid due tax by a means that was not legal. Hence the fine imposed by HMRC. Of course such illegal tax dodging is not as bad an act as is possible, there doubtless worse acts, but it does make the person perpetrating the tax dodging a deeply bad person. Worse then unpleasant. He attempted to steal from us on a massive scale.
Rishi Sunak announced the Tory party chairman’s dismissal citing the findings of his ethics adviser Sir Laurie Magnus’ report that he had committed seven breaches of the ministerial code. But the former minister’s allies suggest the report was rushed out for political expediency and say he was only given one 30-minute meeting to defend himself. And they said a number of key facts in his favour were not included by the ethics adviser, including that he told a senior civil servant about a HMRC investigation into his tax affairs and subsequent fine.
In his report, Sir Laurie said Mr Zahawi had been guilty of repeated “omissions”, citing his failure to update his register of interests until more than a year after HMRC started looking into his taxes. When Mr Zahawi reached a settlement with the taxman in August 2022, this too should have been declared, Sir Laurie said.
Mr Zahawi is furious about the decision to sack him, and is considering issuing a formal response to Sir Laurie’s report, The Times reported.
Allies of Mr Zahawi disputed Sir Laurie’s conclusions, alleging that he told Sir Tom Scholar, the then Treasury permanent secretary, about the HMRC investigation and the fine – something that did not appear in Sir Laurie’s report
And they claimed he had updated his ministerial register of interests in September when he was appointed to the Cabinet by Liz Truss. Sir Laurie’s report states this did not happen until January.
Sir Tom was sacked from the Treasury by Kwasi Kwarteng, Liz Truss’s chancellor, in September. Allies of Mr Zahawi say it is not clear whether Sir Tom was interviewed and say it would be easy to find our whether Mr Zahawi told him and whether this was passed on to the Cabinet Office.
The allies also questioned why Mr Zahawi only had one chance to set out his case to Sir Laurie - at a 30-minute meeting in the Cabinet Office last Wednesday. They said Mr Zahawi had been expecting a subsequent meeting, but he was told on Saturday night that this would no longer take place.
IMO, those defending Zahawi are defending the indefensible by obfuscation - the point is that he’s a tax-dodger of the highest order who, as strathmore says, stole from us, the taxpayers …
