Nadhim Zahawi's brush with UK taxman not his first financial controversy

Minister earned more than £1m as adviser to oil firm operating in Iraq

Nadhim Zahawi, MP, is under pressure due to reports he paid HMRC a seven-figure sum to settle a tax dispute. PA

Nadhim Zahawi is facing a political battle for survival after it was revealed that he failed, until recently, to pay millions of pounds in tax.

The Iraqi-born politician, who is chairman of Britain's ruling Conservative Party, disclosed that he had resolved a tax dispute with His Majesty's Revenue and Customs last year.

He is thought to have paid a tax bill of more than £4.8 million — including a 30 per cent penalty — while serving as chancellor under former prime minister Boris Johnson.

The politician said the error was due to being “careless and not deliberate”.

He now faces an inquiry by the UK’s independent ethics adviser into his tax affairs.

Prime Minister Rishi Sunak, who previously said Mr Zahawi had addressed the matter in full, felt the need for an investigation to “establish all the facts” as he comes under pressure to sack him.

“Integrity and accountability is really important to me and clearly, in this case, there are questions that need answering,” Mr Sunak said.

But it is not the first time Mr Zahawi, an MP since 2010, has faced financial controversy.

Mr Zahawi was paid more than £1 million over two years as a part-time adviser to an oil company operating in the Gulf.

However, his income at the time from Gulf Keystone Petroleum was met with criticism from shareholders — who had seen their investment drop from a share price of 425p to 104p. There was no suggestion of any impropriety by Mr Zahawi.

He worked as chief strategy officer for Gulf Keystone Petroleum, a British oil and gas exploration and production company in Iraq.

During his time at the company from 2015 to 2017, he accrued more than £1 million in salary and bonuses, according to his registered list of interests.

Before his resignation from Gulf Keystone Petroleum in 2018, he was being paid £30,000 a month for working eight to 21 hours a week.

The co-founder of Gulf Keystone Petroleum, Todd Kozel, was sentenced to jail in the US last year for wilful failure to file tax returns from 2011 to 2015. He was ordered to pay $29.5 million.

Before joining Gulf Keystone Petroleum, Mr Zahawi was an adviser for oil group Afren.

Its former executives, Osman Shahenshah and Shahid Ullah, were jailed in 2018 for fraud and money laundering offences over Nigerian oil deals worth $300 million. The UK's Serious Fraud Office recently confiscated £5.45 million from them.

From Iraq to UK

As a child, Mr Zahawi fled Iraq for the UK with his family to escape Saddam Hussein's regime.

He was educated in the UK and obtained a degree in chemical engineering from University College London. Later, he worked as a political aide for disgraced former politician Jeffrey Archer.

In 2000, he cofounded marketing company YouGov — the firm whose share sale is at the heart of his recent tax woes — and became an MP in 2010.

In his latest declaration of Members' Financial Interest, Mr Zahawi revealed he had received rental income from his multimillion-pound country estate in Warwickshire last year, a house in London and a property in Dubai.

In 2013, he came under fire for claiming £5,822 of taxpayer money to heat the estate’s stables.

He also holds shares in BT and SThree, an international specialist recruitment business, of which he was once director. During his time as an MP, he had been paid more than £260,000 by SThree to attend board meetings before his resignation in 2018.

In November, Mr Zahawi received £6,150 from HarperCollins via literary agent the Blair Partnership as an advance payment for a book.

He also received perks worth thousands of pounds, including seats at major FA Cup matches and tickets to see Adele and Billie Eilish.

Mr Zahawi's tax woes came to the fore last week and relate to the sale of shares in YouGov.

He has denied allegations that he avoided tax by using an offshore company registered in Gibraltar — Balshore Investments — to hold shares in YouGov.

The substantial amounts involved had allegedly not been disclosed and Mr Zahawi’s explanation that he had simply been “careless” has not been accepted by many MPs, and there have been mounting calls for him to resign.

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

“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.”

YouGov's accounts describe Balshore Investments as “a family trust of Nadhim Zahawi” but the former chancellor has previously said he “does not have, and never has had, an interest in Balshore Investments and he is not a beneficiary”.