What the Sir Laurie Magnus probe into sacked Tory chairman Nadhim Zahawi’s taxes found

Nadhim Zahawi has been sacked as Conservative Party chairman following an investigation by the government’s ethics adviser into a dispute he had with HMRC over unpaid tax while he was chancellor.

Sir Laurie Magnus found that Mr Zahawi, the Stratfrod-on-Avon MP, had committed a “serious breach” of the ministerial code - a set of standards which MPs must follow while in office.

Rishi Sunak, the prime minister, ordered the probe last week when it emerged part of Mr Zahawi’s multimillion pound payment included a penalty that was paid when he was chancellor and, therefore, essentially in charge of the country’s finances and tax policy.

Mr Sunak in a letter on Sunday morning thanked Mr Zahawi, the minister without portfolio, for his services to the government but told him that he was removing him from his post.

Rishu Sunak and Nadhim Zahawi (EPA)
Rishu Sunak and Nadhim Zahawi (EPA)

Here, The Independent takes a look at what exactly the investigation found, following days of damaging headlines for the government and Mr Zahawi.

Sir Laurie confirms that Mr Zahawi was the “subject of an HMRC investigation that resulted in a determination that tax was owed and that a penalty should be applied”. He says Mr Zahawi provided “his full and open cooperation in assisting with my inquiries” and thanks HMRC for its help.

In a letter to Mr Sunak, he adds that Zahawi and HMRC confirmed to him that the outgoing Conservative Party chairman’s dispute was resolved in August last year, with a settlement agreed signed in the following month.

Citing “taxpayer confidentiality,” he does not say how much Mr Zahawi was forced to hand over as a result of the dispute. Mr Zahawi has so far declined to say how much he owed the taxman.

He says that HMRC’s investigation commenced in April 2021 and included a meeting which Mr Zahawi and his advisers attended with HMRC in June 2021.

“Mr Zahawi has told me that he had formed the impression that he and his advisers were merely being asked certain queries by HMRC concerning his tax affairs, and that this impression persisted until he received a letter from HMRC on 15th July 2022 (dated 13th July),” he adds.

Sir Laurie Magnus says Tory chair committed a ‘serious breach’ of ministerial code (PA Wire)
Sir Laurie Magnus says Tory chair committed a ‘serious breach’ of ministerial code (PA Wire)

Sir Laurie says that Mr Zahawi should have “understood at the outset” that he was under investigation by HMRC and that “this was a serious matter” and one for the minister to “discuss and declare as part of their declaration of interests”.

“I would likewise expect a Minister proactively to update their declaration of interests form to include details of such an HMRC process,” he adds.

Sir Laure adds that, after his appointment as chancellor on 5 July 2022, Mr Zahawi completed a declaration of interests form which contained no reference to the HMRC investigation.

“A later form acknowledged (by way of an attachment) that Mr Zahawi was in discussion with HMRC to clarify a number of queries,” he adds.

“Only following receipt of HMRC’s letter received on 15th July 2022 (dated 13th July), did Mr Zahawi update his declaration of interests form to acknowledge that his tax affairs were under investigation, but he provided no further details other than the statement made previously that he was clarifying queries.”

Zahawi outside Treasury last year after being appointed chancellor (PA)
Zahawi outside Treasury last year after being appointed chancellor (PA)

Sir Laurie went on: “Given the nature of the investigation by HMRC, which started prior to his appointment as Secretary of State for Education on 15th September, 2021, I consider that by failing to declare HMRC’s ongoing investigation before July 2022 - despite the ministerial declaration of interests form including specific prompts on tax affairs and HMRC investigations and disputes - Mr Zahawi failed to meet the requirement (at paragraph 7.3 of the Ministerial Code) to declare any interests which might be thought to give rise to a conflict.”

Sir Laurie also told the PM: “I also conclude that, in the appointments process for the governments formed in September 2022 and October 2022, Mr Zahawi failed to disclose relevant information – in this case the nature of the investigation and its outcome in a penalty – at the time of his appointment, including to Cabinet Office officials who support that process.

“Without knowledge of that information, the Cabinet Office was not in a position to inform the appointing Prime Minister.

“Taken together, I consider that these omissions constitute a serious failure to meet the standards set out in the ministerial code.”

“I consider that Mr Zahawi, in holding the high privilege of being a Minister of the Crown, has shown insufficient regard for the General Principles of the Ministerial Code and the requirements in particular, under the seven Principles of Public Life, to be honest, open and an exemplary leader through his own behaviour,” he concluded.