Former UK chancellor Nadhim Zahawi says tax error was 'careless, not deliberate'

Iraq-born politician admits reaching settlement with revenue officials, as reports say he paid more than £4.8m

British opposition parties say Conservative MP and former chancellor Nadhim Zahawi is in an "untenable" position. PA
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Nadhim Zahawi, the chairman of Britain's ruling Conservative Party, has said his failure to pay millions of pounds in tax was a careless error and not deliberate.

An MP since 2010, Mr Zahawi paid a tax bill of more than £4.8 million including a 30 per cent penalty, UK media reported.

It came after the Revenue and Customs (HMRC) authority disagreed with the allocation of founder shares his father took, when the politician set up market research company YouGov.

On Saturday, there were calls for Mr Zahawi to resign over the issue.

The Iraq-born politician issued a statement, saying he wanted to “address some of the confusion about my finances”.

“When I was being appointed chancellor of the Exchequer [in July, 2022], questions were being raised about my tax affairs. I discussed this with the Cabinet Office at the time,” he said.

“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."

Mr Zahawi did not speak about any penalty, but denied allegations that he avoided tax by using an offshore company registered in Gibraltar, Balshore Investments, to hold shares in YouGov.

“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," he said.

“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.”

YouGov’s 2009 annual report showed more than 10 per cent of shares were held by Balshore.

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

Deputy Prime Minister Dominic Raab defended his colleague, saying Mr Zahawi “has been very clear that he’s paid all the tax that he’s owed” and “if there are further questions, I’m sure there will be the proper transparency”.

The opposition Labour Party’s shadow chancellor Rachel Reeves called for Mr Zahawi to be dismissed from the party position.

“A few months ago, 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,” she said.

“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.”

Labour party chairwoman Anneliese Dodds called for Mr Zahawi to publish all correspondence with HMRC.

“This carefully worded statement blows a hole in Nadhim Zahawi’s previous accounts of this murky affair," she said.

“In the middle of the biggest cost-of-living crisis in a generation, 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’.

“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."

She urged Mr Zahawi to explain why his legal representatives said his affairs were up to date in December last year only for him to settle a million-pound fine.

"He needs to explain why he was using threatening and intimidating legal action to shut down legitimate questions from tax experts last year," she said.

“Rishi Sunak needs to remove Nadhim Zahawi as party chair and set the record straight immediately – including about what he knew about the investigation into Zahawi at the time.”

Prime Minister Rishi Sunak has defended him, saying during 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”.

Updated: January 21, 2023, 4:18 PM