Labour has called on the former chancellor to be sacked, as ITV News Political Correspondent Carl Dinnen reports
Tory party chairman Nadhim Zahawi’s must be sacked from Rishi Sunak's top team, Labour has said, as the former chancellor admitted a tax settlement to HMRC.
The former chancellor, who attends Mr Sunak’s Cabinet, has been under pressure since it was reported that he paid HM Revenue & Customs a seven-figure sum to end a dispute.
In a statement to "address the confusion", Nadhim Zahawi said his father took founder shares in YouGov and that HMRC later “disagreed about the exact allocation”, leading him to “settle the matter and pay what they said was due”.
ITV News Political Editor Robert Peston said it is "extraordinary and unprecedented" that Mr Zahawi negotiated his multimillion pound tax settlement with HMRC while chancellor.
"I am staggered this was thought appropriate by either the cabinet secretary or Treasury permanent secretary," he tweeted.
Deputy Prime Minister Dominic Raab defended his colleague earlier, telling ITV News that "all his tax has been paid."
"Well, I don’t know all the details of his personal tax affairs, but what I know from what he’s said is he’s paid all his tax," he said.
"He’s got no outstanding tax liabilities and I think that’s what people want to know."
Dominic Raab defends Nadhim Zahawi as critics call for an explanation
But Labour's shadow chancellor Rachel Reeves said after a speech at the Fabian Society on Saturday morning that the prime minister should sack Mr Zahawi as Tory party chairman.
She also took aim at Mr Raab, who earlier declined to comment on the status of the bullying inquiry against him amid eight formal allegations. “Dominic Raab, who’s being investigated for bullying, is passing judgment on Nadhim Zahawi, who’s just had a £1 million fine for not paying his taxes on time. That pretty much epitomises this Conservative Cabinet," she said.
“A few months ago, he was Chancellor of the Exchequer, you may forget because there were four of them last year, but he was Chancellor of the Exchequer and responsible for Britain’s tax affairs and tax collection and we now find that he wasn’t so keen to pay himself.
“So if the prime minister wants to stick by his commitment for integrity, honesty and professionalism, he should do the right thing and sack Nadhim Zahawi.”
'He said he would run a government that would have honesty, integrity and professionalism at its heart': Rachel Reeves insists Rishi Sunak should sack Nadhim Zahawi
Labour have also called for an explanation after The Guardian reported that Mr Zahawi paid a 30% penalty, taking the estimated total tax bill to more than £4.8 million.
In a tweet, Labour's deputy leader Angela Rayner echoed calls for Mr Zahawi to go, describing his position as "untenable."
"Nadhim Zahawi’s story about his tax affairs doesn’t add up. After months of denials, the truth emerges," she said. "His position is untenable. Rishi Sunak must dismiss him from his Cabinet."
What has Nadhim Zahawi said?
The Tory party chairman released a statement on Saturday to “address some of the confusion about my finances" - admitting he paid a tax settlement after HMRC disagreed with the allocation of founder shares his father took when he set up YouGov.
He said: “As a senior politician I know that scrutiny and propriety are important parts of public life.
"Twenty-two years ago I co-founded a company called YouGov. I’m incredibly proud of what we achieved. It is an amazing business that has employed thousands of people and provides a world-beating service.
“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 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 allegedly avoided tax by using an offshore company registered in Gibraltar to hold shares in the polling company he co-founded, YouGov. He co-founded YouGov in 2000.
The polling company's 2009 annual report showed a more than 10% shareholding by Gibraltar-registered Balshore Investments.
The report described the company as the “family trust of Nadhim Zahawi”, then an executive director of the polling firm.
Tax lawyer Dan Neidle has estimated that Mr Zahawi owed £3.7 million, and said that with interest that could be due on top of the reported 30% penalty, the total could be more than £4.8 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.”
The government website says a penalty of up to 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%.
A spokesman for Mr Zahawi previously said his taxes were “properly declared and paid in the UK” and the minister had “never had to instruct any lawyers to deal with HMRC on his behalf.”
Mr Sunak has defended him, telling Prime Minister’s Questions on Wednesday that Mr Zahawi “has already addressed this matter in full and there’s nothing more that I can add.”
Questions about Mr Zahawi’s tax affairs have added to a series of challenges this week for the Prime Minister, who was fined by police for not wearing a seatbelt in the back of a moving car.
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