Labour calls for Nadhim Zahawi to be sacked over tax allegations

Nadhim Zahawi attends Rishi Sunak's Cabinet. Credit: PA

Labour has called for the prime minister to sack Nadhim Zahawi following claims the Conservative Party chairman paid a penalty to the government to settle a multi-million-pound tax bill.

The former chancellor, who attends Rishi Sunak’s Cabinet, has been under pressure since it was reported that he paid a seven-figure sum to end a dispute.

Deputy leader Angela Rayner said Zahawi's position is now "untenable" and that he should be dismissed from the Cabinet.

She also urged HMRC to clear up the "serious questions raised about a potential conflict of interest".

Ms Rayner said on Friday: "Rishi Sunak promised a government of integrity, professionalism, and accountability but instead he's propping up a motley crew of scandal-ridden ministers. "Nadhim Zahawi's story doesn't add up. The position of the man who was until recently in charge of the UK's tax system and who this prime minister appointed Conservative Party chair is now untenable. "It's time for Rishi Sunak to put his money where his mouth is and dismiss Nadhim Zahawi from his Cabinet."

ITV News Deputy Political Editor Anuska Asthana discusses what this means for Nadhim Zahawi

When asked about the situation on Wednesday, before allegations around the tax penalty came to light, Mr Sunak's spokesperson said the prime minister backed Mr Zahawi.

The spokesperson said Mr Sunak took Mr Zahawi "at his word."

Tax lawyer Dan Neidle has been working to expose the minister’s tax affairs and has estimated that he owed £3.7 million.

Mr Neidle, of the Tax Policy Associates think tank, said "you don’t pay a 30% 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," he said.

The prime minister has previously backed Mr Zahawi. Credit: PA

The lawyer said the chances Mr Zahawi had paid a penalty were "almost inevitable" after the Sun on Sunday reported that he had settled a seven-figure sum with HMRC.

Asked about the level of the reported penalty, Mr Neidle said: "It probably means that at least he didn’t admit to deliberate behaviour, it probably means he admitted to carelessness."

The Guardian first reported news of the penalty and claimed it was 30% of the total bill.

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The government website says a penalty of between 0 and 30% is due if it arises because of a lack of reasonable care.

A deliberate error can incur a penalty of between 20 and 70%.

The Conservative MP allegedly avoided tax by using an offshore company registered in Gibraltar to hold shares in the polling company he co-founded, YouGov.

YouGov’s 2009 annual report showed a more than 10% shareholding by the Gibraltar-registered Balshore Investments Ltd.

The report described the company as the "family trust of Nadhim Zahawi", then an executive director of the polling firm.