Shares in Gibraltar and some very taxing questions
IT WAS, said Conservative Party chairman Nadhim Zahawi, a ‘careless error’ that led him to not paying the taxes he owed.
And so, after negotiating a settlement with HMRC – astonishingly, when he was chancellor and therefore in charge of HM Revenue and Customs – he has paid the taxman millions.
The ‘confusion’ goes back to the beginnings of Mr Zahawi’s success in 2000…
YOUGOV SHARES
Mr Zahawi’s rise to fortune and political success are inspiring. He was born in Baghdad to Kurdish parents and arrived in the UK aged nine, unable to speak English.
In May 2000, when he was 32, Mr Zahawi co-founded the YouGov political polling company. He took no shares himself but a Gibraltar-based company, Balshore Investments Ltd, was allocated shares equal in value to those given to his co-founder Stephan Shakespeare.
Balshore was held by a trust which documents state is ‘the family trust of Nadhim Zahawi’s family’, controlled by Mr Zahawi’s parents. Mr Zahawi said his father, Hareth, had offered him ‘invaluable guidance’ and some cash to help start the company and was allocated shares in return.
YouGov was highly successful. Mr Zahawi was chief executive and a director until 2010. Balshore Investments disposed of its YouGov shareholdings about eight years later. By then, they were worth about £27 million. If Mr Zahawi was a beneficiary of that transaction, he would owe capital gains tax on it.
Among the questions Mr Zahawi has faced is whether the trust was really controlled by his parents.
Or was he himself the true beneficiary of the sale of Balshore’s shares?
NATIONAL CRIME AGENCY
In July last year, when Mr Zahawi was appointed chancellor, it was reported that his finances were under investigation by the National Crime Agency. Mr Zahawi, one of the richest Cabinet members, described stories about his tax affairs as ‘smears’.
INDEPENDENT EXPERT
Saying Mr Zahawi ‘is not a beneficiary’ of Balshore is not the same as saying he never has been, according to Dan Neidle, an expert from the Tax Policy Associates think-tank. Mr Neidle has previously said ‘the obvious rationale’ for the Balshore arrangement with the YouGov shares was ‘tax avoidance’ – a claim strenuously denied by Mr Zahawi, whose lawyers sent Mr Neidle threatening letters.
HMRC PENALTIES
Matters came to a head last week when it was reported that Mr Zahawi had settled his dispute with HMRC – and agreed to pay several million pounds. It was also reported that the sum included a 30 per cent penalty on top of an estimated tax bill of £3.7 million.
Mr Neidle said: ‘You don’t pay a 30 per cent penalty if your tax affairs are in order. You do it, at best, if you’ve been careless – if you haven’t paid tax that’s due.’