There are “no innocent errors” when it comes to tax penalties, the head of HMRC has said during the ongoing dispute over Nadhim Zahawi’s tax affairs.
James Hara, HMRC’s chief executive, told MPs on Thursday: “There are no penalties for innocent errors in your tax affairs.
“So if you take reasonable care, but nevertheless make a mistake, whilst you will be liable for the tax and for interest if it’s paid late, you would not be liable for a penalty. But if your error was as a result of carelessness, then legislation says that a penalty could apply in those circumstances.”
The row surrounding Mr Zahawi centres on a tax bill over the sale of shares in YouGov, the polling firm Mr Zahawi founded, worth an estimated £27 million which were held by Balshore Investments, a company registered offshore in Gibraltar and linked to Mr Zahawi’s family.
Mr Zahawi has said that HMRC concluded there had been a “careless and not deliberate” error in the way the founders’ shares, which he had allocated to his father, had been treated.
Rishi Sunak – who has ordered his ethics adviser to investigate Mr Zahawi’s tax settlement – is said to be “livid” with his Cabinet minister over the saga, according to The Times.
The prime minister has not spoken to his party chairman since he revealed details of his settlement with HM Revenue and Customs at the weekend.
HMRC: No ‘innocent errors’ in tax penalties
The head of HMRC has suggested Nadhim Zahawi has not made an “innocent” tax error.
James Harra told MPs on Thursday: “There are no penalties for innocent errors in your tax affairs.”
It comes after Mr Zahawi paid a penalty to settle a £5m tax row, claiming the mistake was just deemed “careless and not deliberate”.
Read more below:
Editorial: It is time for Rishi Sunak to show his ruthless side
Editorial: Rishi Sunak needs to be very clear about when and whether he knew about Nadhim Zahawi’s tax affairs – and he needs to do it before much more damage is done.
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Nadhim Zahawi: 5 questions that need answering on tax affairs
Some Tory MPs want Mr Zahawi to quit, though others have urged him to “get out” more tax details in an attempt to clear the matter up. The Independent takes a closer look at the big unanswered questions.
Political Correspondent Adam Forrest has more:
HMRC has a “duty of confidentiality” not to report tax affairs of prominent politicians, says chief exec
In a meeting with MPs on Thursday, HMRC chief executive Jim Harra was asked what the organisation would do if a prominent politician make a claim about their tax affairs that HMRC knows is “categorically false”.
Committee chairwoman Dame Meg Hillier asked Mr Harra whether HMRC would ever correct that.
He said such a position could be a matter of “frustration” but that HMRC had a duty of confidentiality.
“As a general rule, our duty of confidentiality would mean that if a taxpayer made a public statement about their affairs which we felt we did not agree with, that would not be a matter that we would correct.
“But again, we would look at things on a case-by-case basis and decide whether in that particular case, the issue was such that it was within our functions to disclose information, but as a general rule our default is that we don’t disclose, and it can be a source of frustration for HMRC because people will brief the press or perhaps brief MPs about their tax affairs.
“We will sometimes feel it’s not the full story, but we have to deal with it on the basis of their disclosure because we’re not in a position to disclose further information.”
Nadhim Zahawi’s tax affairs: A timeline of how the controversy played out
The ongoing row centres on a tax bill over the sale of shares in YouGov, the polling firm Mr Zahawi founded. The shares, worth an estimated £27m, were held by Balshore Investments, a company registered offshore in Gibraltar and linked to Mr Zahawi’s family.
Dominic McGrath outlines how the controversy has played out:
Why Rishi Sunak must sack Nadhim Zahawi
The prime minister must tackle the dangerous perception the government still follows Johnson’s ‘one rule for us, another for everyone else’ mantra, says Andrew Grice.
Rishi Sunak will have to sack Nadhim Zahawi, the Conservative Party chair. The only route to Sunak being a successful prime minister is for him to be “not Boris Johnson”, and lift the shadow still being cast over the government by Johnson – who, after leaving office, has clearly not lost his love of being the centre of attention.
Johnson tried to bend the rules to protect friends such as Priti Patel, Owen Paterson, and Chris Pincher when they ran into trouble of their own making. It usually ended in tears, and certainly did when Johnson’s inaction over Pincher – the former deputy chief whip who resigned after groping allegations – hastened his own downfall.
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Downing Street wants Zahawi investigation concluded ‘as quickly as possible’, says spokesperson
Downing Street said that the Prime Minister still has confidence in Nadhim Zahawi, but suggested that the inquiry would take place as quickly as possible.
Asked if Number 10 had asked the independent adviser on ministerial interests to expedite the investigation, a spokesman for the Prime Minister said: “We’ve said we would like it to be concluded as quickly as possible, but as I say, we haven’t put a time constraint on it. It is for him to establish the facts, for him to undertake the work as he sees fit, and then report back to the Prime Minister.”
The spokesman also indicated that the Prime Minister would support Mr Zahawi giving any approval HMRC needed to help the ethics inquiry.
“It’s an independent investigation. So I can’t comment on the process. It follows more broadly the Prime Minister expects participation with it,” the spokesman said.
He pointed reporters to Mr Zahawi’s previous statement on the issue, but said it was a matter for the independent adviser.
‘Offensive’ police code name for Nadhim Zahawi tax probe linked to tropical fish
Up to 50cm in length and found off the coastline of Mexico, it is known as “Popeye Catalufa” because of its bulging eyes which are suited to its carnivorous and nocturnal lifestyle.
The NCA says codenames for their inquiries are chosen at random.
However, some allies of Mr Zahawi have questioned whether the “offensive and unfunny” name was a joke at his expense.
The Independent has seen confidential official correspondence where the term is used in relation to the cabinet minister.
Simon Walters reports:
Downing Street declines to comment on HMRC chief remarks
Downing Street declined to comment on remarks by HMRC chief executive Jim Harra at the Public Accounts Committee on Thursday, where he made clear that there are “no penalties for innocent errors” in an individual’s tax affairs.
A spokesman for the prime minister referred reporters to Rishi Sunak’s remarks in the Commons on Wednesday.
“The independent adviser will establish the facts and provide advice to the PM and then he will obviously consider next steps. I obviously can’t pre-empt that. It is right that the independent adviser is allowed to continue with that work,” he said.
Asked about speculation that the ethics inquiry into Nadhim Zahawi could be completed in as little as 10 says, the spokesman said: “We have said that we would like to see the work completed as quickly as possible.
“That remains the case but ultimately the timeline is a matter for the independent adviser. We wouldn’t put a time constraint on him.”
Sunak expected to be joined by Zahawi at Chequers away day
Rishi Sunak is expected to be joined by Nadhim Zahawi when the Cabinet meets for an away day at the prime minister’s grace-and-favour country house.
The trip to Chequers in Buckinghamshire comes after days of headlines about Mr Zahawi’s tax affairs, with the Conservative Party chairman subject to an ethics probe.
Work and Pensions Secretary Mel Stride said the result of that investigation, which the Prime Minister announced on Monday, could take just 10 days.
Mr Sunak ordered an investigation by Sir Laurie Magnus, his independent adviser on ministers’ interests, into whether Mr Zahawi broke ministerial rules over the estimated £4.8 million bill he settled with HM Revenue & Customs (HMRC) while he was chancellor.
Mr Stride, put to him on ITV’s Peston programme on Wednesday that rumours suggested the probe could be done within 10 days, said it “wouldn’t be untypical” for Sir Laurie to operate in that timeframe.
He added: “I can’t be drawn on an arrangement of which I don’t know all the details.
“But the good news is that we will, in around it sounds like ten days’ time or thereabouts, hear from the ethics adviser, who will report to the Prime Minister, the Prime Minister will then have the facts and be able to make exactly those judgments.”
