Ex-UK chancellor Nadhim Zahawi faces questions over claims he paid tax penalty

Reports allege he paid a seven-figure sum to authorities to settle tax dispute

Nadhim Zahawi. EPA
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Former chancellor Nadhim Zahawi faces fresh questions over his tax affairs after he was accused of paying a penalty as part of a multi-million-pound settlement with HMRC, the UK Revenue and Customs department.

Iraq-born Mr Zahawi, who attends Prime Minister Rishi Sunak’s Cabinet, has been under pressure since it was reported that he had paid a seven-figure sum to end a tax dispute.

The Guardian newspaper has now reported that he paid a 30 per cent penalty, taking the estimated total to more than £4.8 million ($5.9 million).

Both Mr Zahawi’s team and the Conservative Party were contacted about the latest allegation but neither have responded.

Questions have swirled since newspaper reports of a tax dispute.

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

Labour has called for an inquiry into Mr Zahawi and its deputy leader Angela Rayner urged HMRC to clear up the “serious questions raised about a potential conflict of interest”.

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

Interest could be due on top of the 30 per cent penalty reported by the Guardian, taking the possible total to in excess of £4.8 million.

Mr Neidle, of the Tax Policy Associates think tank, 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,” he said.

The lawyer said it 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 government's website says a penalty of between 0 and 30 per cent is due if it arises because of a lack of reasonable care, while a deliberate error can incur a penalty of between 20 and 70 per cent.

Ms Rayner said: “If HMRC has applied a 30 per cent penalty in this case, the British people deserve to know why, yet the Conservative Party chair [Mr Zahawi] is maintaining a deafening silence.

“It’s quite clearly a matter of public interest to know if the man who was, until recently, in charge of the UK tax system has accepted he was at fault or been subjected to a penalty to settle his own tax bill.

“Rishi Sunak must explain what he knew about this, and why he appointed Nadhim Zahawi to his Cabinet.”

A spokesman for Mr Zahawi has previously said his taxes are “properly declared and paid in the UK” and that the minister “has never had to instruct any lawyers to deal with HMRC on his behalf”.

Mr Sunak has defended his ally, saying at 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”.

The Prime Minister’s press secretary said Mr Zahawi “has spoken and been transparent with HMRC”.

On whether Mr Sunak believes the matter is now closed, she said: “I don’t know whether the Prime Minister has reviewed it in full, but I do know that he takes Nadhim Zahawi at his word.”

Updated: January 20, 2023, 6:03 PM