Nadhim Zahawi position ‘untenable’ after tax admission, say Tory MPs

Nadhim Zahawi’s position as Conservative Party chair is “untenable”, Tory MPs have warned despite the government’s attempts to draw a line under the furore surrounding his tax affairs.

The ex-chancellor is fighting for his political life after admitting that he had paid the HMRC a settlement over a “careless” error, but failed to clear up a series of questions about the investigation first revealed by The Independent in July.

Foreign secretary James Cleverly claimed his colleague had been “open” about his taxes, but evaded questions on the row – insisting that he was “not an investigative journalist” and had been too busy shopping after an overseas trip to know any more details.

But former party leader Iain Duncan Smith said Mr Zahawi must share more information and “get it all out now”, while other senior Tories warned it was almost impossible for the party chair to continue in his job.

One former Tory minister told The Independent that Mr Zahawi’s position was now “untenable” after his admission that there had been a dispute with the HMRC over an error in his tax affairs.

The senior MP said Mr Zahawi should never have become chancellor if the fact he had been “careless” with his tax affairs was known by No 10 and the Cabinet Office.

Another senior Tory said Mr Zahawi was “unlikely” to survive the tax row. “Carelessness with finances wouldn’t have been a recommendation for the post of chancellor, had we known about it,” the ex-cabinet minister said. “It’s hard to see how it can be acceptable for the post of chairman.”

Tory MP Peter Aldous also questioned whether he should “ever have been appointed chancellor”, before urging the minister to share more details. “I think he’s got to clarify and confirm that – if it was a careless mistake and nothing deliberate,” the backbencher told Times Radio.

Tory peer Lord Young also told the station that the under-pressure minister was “going to have to be more transparent”, warning “the story simply isn’t going to go away.”

It came as Labour called for Mr Zahawi to publish his tax returns for the past five years, and demanded that Rishi Sunak “come clean on what he knew and when” about his minister’s tax affairs.

Labour chair Anneliese Dodds said Mr Zahawi could help clear up the controversy by publishing his full tax returns going back to 2018, the year that a stake in YouGov was sold by Balshore Investments – a Gibraltar-registered family trust linked to Mr Zahawi.

“This could have been avoided if Nadhim Zahawi had answered simple questions, such as when he was made aware of an HMRC investigation, how much has been paid, and why these reports appear to contradict his previous statements. Regrettably, he has failed to do so,” she told The Independent.

How The Independent revealed HMRC inquiries into Zahawi (The Independent)
How The Independent revealed HMRC inquiries into Zahawi (The Independent)

Mr Zahawi has not disclosed the size of the HMRC settlement – reportedly an estimated £4.8m, including a 30 per cent penalty of around £1m – or confirm whether he paid a fine. But his spokesperson has not denied that a penalty was paid.

The Tory chair – who had previously claimed that inquiries by HMRC into his taxes were a “smear” – admitted on Saturday that “questions were being raised about my tax affairs” when he was being appointed chancellor by Boris Johnson in July.

Mr Zahawi also said he had discussed it with the Cabinet Office at the time – but details of how the money was then paid to HMRC remains unclear. A Zahawi aide told the BBC the settlement was resolved while he was chancellor.

The ex-chancellor also denied allegations that he avoided tax through an offshore company. He said he did not take founder shares when he set up YouGov, saying his father’s Balshore Investments trust took shares “in exchange for some capital and his invaluable guidance”.

The former chancellor is facing further questions over his tax affairs (PA)
The former chancellor is facing further questions over his tax affairs (PA)

Foreign secretary James Cleverly said Mr Zahawi has been “open” about his tax affairs, and insisted that he would remain in his role by the time of this week’s PMQs, despite growing calls for him to be sacked.

But the minister evaded questions on when exactly Mr Zahawi knew about his tax problem and how much the PM knew of the matter. “I’m not an investigator,” Mr Cleverly told Sky News’ Sophy Ridge on Sunday. “I don’t know more than is in his statement.”

However, Sir Iain urged Mr Zahawi to reveal more if he wanted to stop the story building. “The sooner you can get the absolute facts out the better,” the former Tory leader told the BBC’s Sunday with Laura Kuenssberg. “Get it all out now.”

Sir Bob Kerslake, the former head of the civil service, said Mr Sunak could consider suspending Mr Zahawi – saying there were still “some quite big questions to be answered here”.

He told Times Radio. “If he’s not satisfied that he’s got the full answers, then I think at least a suspension while he investigates it will be appropriate. It may be that if he is deeply concerned about how things went, this might lead to a sacking.”

Pressure is also growing on Mr Sunak to set out what he knew of tax concerns when he appointed Mr Zahawi to his cabinet, amid claims that Cabinet Office officials alerted then-prime minister Boris Johnson to the matter before he appointed Mr Zahawi as chancellor.

The Sun on Sunday reported that the Tory chair had been due to receive a knighthood in the recent New Year’s honours list, but was blocked due to concerns over his tax situation.

Labour called for the release of all correspondence related to Mr Zahawi’s tax problem with No 10 prior to various appointments, to confirm whether he was chancellor at the time of the settlement, and to explain how his conduct aligns with the ministerial code.

A No 10 spokesperson said on Sunday it had nothing to add to Mr Zahawi’s statement, and confirmed that the PM still had confidence in him as Tory chair.

The Cabinet Office declined to comment when asked about reports that a “red flag” was raised shortly before his appointment as chancellor, or about the claim Mr Zahawi was rejected from a knighthood.

HMRC chief executive Jim Harra is likely to be grilled by MPs on the resolving of tax disputes with ministers when he appears before the Commons public accounts committee to answer questions about tax compliance on Thursday.