tax affairs of Nadhim Zahawi

 Source - Daily Telegraph 23/01/23

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Afternoon,

Rishi Sunak has asked his independent ethics adviser Sir Laurie Magnus to look into the tax affairs of Nadhim Zahawi, as “clearly in this case there are questions that need answering”.

The PM stepped in after Zahawi’s friends insisted the chairman of the Conservative Party was not planning to resign amid a furore over his tax affairs.

If this feels like it is five minutes to midnight on Zahawi’s political future, it is because it is.

Zahawi said this morning: “I am confident I acted properly throughout and look forward to answering any and all specific questions in a formal setting to Sir Laurie.”

Well, quite. But I can’t help feeling that Zahawi could have avoided the embarrassing investigation into his tax affairs if he had only been more upfront in the first place.

News that he had reached a multi-million pound settlement with HMRC first emerged eight days ago. This morning the BBC is reporting that the total amount paid is in the region of about £5 million. That tallies with a Guardian report that Zahawi paid back tax £4.8 million, covering back taxes and a 30 per cent penalty.

The row centres around founder shares in Zahawi’s company YouGov which he gave to his father in an offshore trust over two decades ago when he was setting up the polling company.

“I asked my father to help,” Zahawi said in a statement on Saturday. “In the process, he took founder shares in the business in exchange for some capital and his invaluable guidance.

“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.”

The row “was resolved prior to my appointments as Chancellor of the Duchy of Lancaster and subsequently chairman of the party”, he said. “When I was appointed by the Prime Minister, all my tax affairs were up to date.”

Mr Zahawi was appointed to the Cabinet Office on Sept 6. Before that he had been Chancellor of the Exchequer since July 5.

The implication is that the row was raging during the two-month period when Zahawi was Chancellor and had oversight of the work of HM Revenue and Customs.

The timing could hardly be worse with millions of people filling in their tax returns ahead of the Jan 31 self assessment deadline for the 2021/22 tax year fast approaching.

It’s very messy. But is it a resigning matter? Zahawi hopes not but I can’t think that the situation could have been remedied if Zahawi gave a warts and all interview about what happened.

Former Tory leader Sir Iain Duncan Smith, who has seen these rows blow up a thousand times, urged Zahawi yesterday to “get it all out now, whatever you have to do, and clear it up”. He was right.

I detect an impatience in Sunak’s remarks this morning.

Last week he had said Zahawi “has already addressed this matter in full and there’s nothing more that I can add”. Zahawi’s statement over the weekend showed clearly that he had not.

Zahawi rightly won huge plaudits for the way he ran the Covid-19 vaccine programme at the height of the pandemic. But he has been a lot less assured in public about his tax affairs.

Some business people are looking on, rolling their eyes at the treatment of a successful businessman like Zahawi.

Entrepreneur and a big Tory donor Johnny Leavesley tells me today: “The calls for resignation and criticism of Nadhim Zahawi’s tax penalty and settlement with HM Revenue & Customs are overblown and simplistically expedient.

“Unless new facts emerge that reveal dishonesty, which is unlikely because a prosecution would otherwise be underway, there is no issue of dishonour to justify his resigning.

“So long as HMRC is satisfied, we have no right to further details.”

Leavesley adds: “There is a trend of disproportionate, sanctimonious hyper-criticism when politicians are attacking each other, often coupled with urging the police or other regulators to waste time investigating. It is unlikely to encourage quality entrants into public life.”

I wonder if the row over Zahawi's tax affairs will force the pace on Sunak and Labour leader Sir Keir Starmer having to publish their personal tax returns. I would not at all be surprised, particularly given that SNP leader Nicola Sturgeon said today she would publish her tax return.

But for now it is all about Zahawi. Asked whether he would still be the Tory chairman in a month, Dominic Raab - Sunak’s deputy - replied at the weekend: “A month’s a long time in politics. I certainly hope so.”

Zahawi could have given a full and frank interview to clear the air when the HMRC settlement first emerged. He didn’t - and now his future is no longer in his hands.

Cheerio!

Chopper