Labour has called on under-pressure cabinet minister Nadhim Zahawi to publish his tax returns for the past five years, amid growing questions about his settlement with HMRC.
Anneliese Dodds, Labour party chair, told The Independent that the Tory chair “had not been clear” about the dispute with HMRC and so should publish his returns “in the interests of transparency and clarity”.
The Independent first revealed last July that Mr Zahawi was subject to an investigation by HMRC linked to the sale of shares in polling company YouGov, which he co-founded 22 years ago.
Ms Dodds said the former chancellor could help clear up the controversy by publishing his full tax returns going back to 2018, the year that a stake in YouGov was sold by Balshore Investments – a Gibraltar-registered family trust linked to Mr Zahawi.
“Nadhim Zahawi has not been clear about the serious questions he has to answer about his tax affairs,” said Ms Dodds. “Reluctantly, I must ask that he publish his tax returns in the interests of transparency and clarity.”
She added: “This could have been avoided if Nadhim Zahawi had answered simple questions about this affair, such as when he was made aware of an HMRC investigation, how much has been paid, and why these reports appear to contradict his previous statements. Regrettably, he has failed to do so.”
In a statement admitting his “error” on Saturday, Mr Zahawi did not disclose the size of the HMRC settlement – which The Guardian reported to be an estimated £4.8m including a 30 per cent penalty – or confirm whether he paid a fine.
Mr Zahawi denied allegations that he avoided tax by using an offshore company Balshore Investments, registered in Gibraltar to hold shares in YouGov.
In an unusual move, Mr Zahawi did not take founder shares when he set up YouGov, saying in his statement that his father’s Balshore Investments took shares “in exchange for some capital and his invaluable guidance”.
Mr Zahawi said that “questions were being raised about my tax affairs” when he was being appointed chancellor by Boris Johnson in July, saying he had discussed it with the Cabinet Office at the time. But the timing of the settlement with HMRC is still unclear.
He stated: “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 … I chose to settle the matter and pay what they said was due.”
Tax lawyer Dan Neidle, who has been working to expose the minister’s tax affairs, estimated that Mr Zahawi may have owed £3.7m capital gains tax on those shares, eventually sold for £27m. But the Tory chair’s spokesperson said: “Nadhim Zahawi does not recognise this amount.”
Labour has called for Rishi Sunak to sack Mr Zahawi, and called for an investigation into whether he had misled the public or broken the ministerial code in his claims about his taxes.
Ms Dodds said there were apparent discrepancies between statements made by Mr Zahawi in the summer of 2022 that he had paid his taxes in full, and reports he had paid a “seven-figure” settlement and penalty to HMRC.
She has also raised questions about how swiftly the tax matter appeared to have been resolved, given how long such settlement negotiations tend to take – asking whether there is a “VIP fast lane” for ministers and whether there was contact between the government and HMRC on this case.
“Rishi Sunak promised honesty, integrity and accountability on entering No10. He too needs to be clear about what he or No10 knew about Zahawi’s tax affairs and why he was appointed to the cabinet,” said Ms Dodds. “The public deserve politicians who pay their taxes and stick by their promises.”
Nadhim Zahawi under pressure to disclose ‘facts’ of tax case
Foreign secretary James Cleverly said Mr Zahawi has been “open” about his tax affairs and insisted that he would remain on in his role next week despite calls for him to be sacked.
But the minister evaded questions on whether Mr Zahawi negotiated his tax settlement with HMRC while he was chancellor, and what Mr Sunak knew when he appointed him party chair. “I’m not an investigator,” said Mr Cleverly. “I don’t know more than is in his statement.”
However, Sir Iain Duncan Smith suggested Mr Zahawi should provide all the“facts” of his tax affairs – advising the Tory chair to “get it all out now” when asked about the controversy on the BBC.
“The sooner you can get the facts out the better, rather than having them all come out in phases,” said the former Tory leader. “I would say to him if he was here now, ‘Get it all out now – whatever you have to do to clear it all up’.”
Liberal Democrat deputy leader Daisy Cooper said Mr Cleverly’s “dog ate my homework type excuses simply won’t wash with the public”.
She has written to cabinet secretary Simon Case, urging him to investigate whether Mr Zahawi should have declared any links to Balshore and YouGov shares. “There are facts that still need to be established so there must be an independent investigation to get to the bottom of this.”
Labour’s shadow chancellor Rachel Reeves vowed that a Labour government would “drain the swamp”, saying Mr Sunak was “too weak” to enforce proper standards. “It’s going to take an incoming Labour government to clean up this mess, drain the swamp, because, frankly, it stinks.”
Asked whether cabinet ministers would publish their tax returns under a Labour government, she told the BBC’s Sunday With Laura Kuenssberg programme: “I would be happy to do that if that was the thing that was necessary.”
Labour’s shadow chief Treasury secretary Pat McFadden says that “maybe” all politicians should publish their tax returns, telling Sky News: “I wouldn’t have a problem with that.”
Downing Street said it had nothing to add to Mr Zahawi’s statement and confirmed that the PM still had confidence in him as Tory chairman.
