I was careless over tax affairs, says Zahawi
NADHIM ZAHAWI said that HMRC deemed errors in his tax affairs “careless and not deliberate” as he sought to head off growing calls for his resignation yesterday.
The embattled Conservative chairman released a statement yesterday admitting he had agreed to settle unpaid tax relating to shares kept in an offshore trust, following reports that he had paid millions to HMRC including a penalty. However, critics said he must release further information to prove he had no conflicts of interest with HMRC during his stint as chancellor. Mr Zahawi has since last summer faced questions over why shares from YouGov – the polling company he co-founded in 2000 – were kept in Balshore Investments, a Gibraltar-registered family trust.
Tax experts have estimated the capital gains tax that would have been incurred from selling the shares would have amounted to some £3.7million, had they been owned by Zahawi directly. The Guardian reported on Friday that Mr Zahawi had agreed to pay a penalty of around 30 per cent of that amount – around £1.1million – something that has not been denied by his press team. In the statement, Mr Zahawi said he wanted to “address some of the confusion about my finances in the media”. He said: “Twenty-two years ago, I co-founded a company called YouGov. 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
the chairman of the party I love so much. When I was appointed by the Prime Minister, all my tax affairs were up to date.”
Mr Zahawi was appointed chancellor on July 5 and served in the post until he was shuffled to Chancellor of the Duchy of Lancaster on Sept 6.
As HMRC falls within the Treasury’s remit, questions have been posed about whether Mr Zahawi settling the matter as chancellor could have resulted in a conflict of interest. Last night, ITV news reported that the Government’s propriety and ethics team raised Mr Zahawi’s tax affairs directly with Boris Johnson, who was prime minister at the time.
Annelise Dodds, Labour’s chair, repeated the party’s call for Rishi Sunak to sack him from the Government.
Ms Dodds said: “This carefully worded statement blows a hole in Nadhim Zahawi’s previous accounts of this murky affair. He must now publish all correspondence with HMRC so we can get the full picture.
“The public will rightly be astonished that anyone could claim that failing to pay millions of pounds worth of tax is a simple matter of ‘carelessness”.
She added: “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.”
The Liberal Democrats have, meanwhile, tried to increase the pressure on Mr Zahawi by writing to the Prime Minister’s ethics adviser, Sir Laurie Magnus, asking him to carry out an independent investigation. The Sunday Telegraph understands that Labour is poised to make a similar written request to Sir Laurie.
Earlier yesterday, Dominic Raab, the Deputy Prime Minister and Justice Secretary, failed to guarantee Mr Zahawi’s political future. Asked whether he would still be the Tory chairman in a month, Mr Raab replied: “A month’s a long time in politics. I certainly hope so.”