Nadhim Zahawi is under growing pressure after admitting he paid a settlement to HM Revenue & Customs following a “careless and not deliberate” tax error related to a shareholding in YouGov.
The embattled Tory party chairman released a statement on Saturday to “address some of the confusion about my finances”, after it was reported that he paid HMRC a seven-figure sum to end a dispute.
But the statement raised further questions, including whether Mr Zahawi negotiated the settlement when he was chancellor and in charge of the country’s taxation.
Claims about Mr Zahawi’s tax affairs began emerging when he was appointed chancellor by Boris Johnson last summer, with reports suggesting Cabinet Office officials had alerted the then-prime minister to the HMRC dispute.
Mr Zahawi, who attends Rishi Sunak’s Cabinet, did not disclose the size of the settlement – reported to be an estimated £4.8 million including a 30% penalty – or confirm whether he paid a fine.
He denied allegations that he avoided tax by using an offshore company registered in Gibraltar to hold shares in YouGov.
Tax lawyer Dan Neidle, who has been working to expose the minister’s tax affairs, estimated that he owed £3.7 million.
In an unusual move, Mr Zahawi did not take founder shares when he set up YouGov, saying in his statement that his father took shares “in exchange for some capital and his invaluable guidance”.
He continued: “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.”
HMRC agreed that he had never set up an offshore structure, including Balshore Investments, “and that I am not the beneficiary of Balshore Investments,” Mr Zahawi said.
He added that the matter was resolved and that all his tax affairs were “up to date” when he was appointed Conservative party chairman by Mr Sunak in October.
But the Prime Minister is facing questions over what he knew about the matter and when, as well as calls to sack Mr Zahawi.
Mr Sunak’s promise of a premiership of “integrity” was already thrown into disarray this week after he was fined by police for not wearing a seatbelt and criticised for the allocation of levelling-up funding.
Downing Street said it had nothing to add to Mr Zahawi’s statement and confirmed that the Prime Minister had confidence in him as Tory chairman.
Opposition parties have demanded an independent probe as well as the publication of all of Mr Zahawi’s correspondence with HMRC.
Labour party chairwoman Anneliese 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.
“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.”
Liberal Democrat 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.”