Tory party chairman Nadhim Zahawi claims tax error was ‘careless and not deliberate’

Nadhim Zahawi has admitted he paid a tax settlement after HM Revenue & Customs disagreed with the allocation of founder shares his father took when he set up YouGov.

The embattled Tory party chairman has been under pressure since it was reported that he paid HMRC a seven-figure sum to end a dispute, with Labour calling for him to be sacked.

Zahawi insisted that his tax error was “careless and not deliberate” and that the matter was resolved before taking up his current post.

The former chancellor released a statement on Saturday to “address some of the confusion about my finances” after reports that he paid a penalty as part of a multimillion-pound tax settlement.

He said that when he set up the YouGov polling company in 2000, his father took founder shares.

He added: “Twenty one years later, when I was being appointed chancellor of the exchequer, questions were being raised about my tax affairs. I discussed this with the Cabinet Office at the time.

“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.

Zahawi said the matter was resolved and “all my tax affairs were up to date” when Prime Minister Rishi Sunak appointed him as party chairman.

Labour earlier said the Tory chair’s position was “untenable” and called for an explanation after The Guardian reported that Zahawi paid a 30% penalty, taking the estimated total tax bill to more than £4.8m.

Shadow chancellor Rachel Reeves said: “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.

“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 deputy leader Angela Rayner criticised Zahawi’s refusal to comment up until his statement on Saturday, saying: “The fact that Nadhim hasn’t been out on the airwaves explaining himself, to me, adds insult to injury.”

She added: “If he’s lied and misled the public and HMRC regarding his tax affairs then I think his position is untenable.”

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

He said: “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 a more than 10% shareholding by Gibraltar-registered Balshore Investments.

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

Sunak has defended Zahawi, telling Prime Minister’s Questions on Wednesday that he had “already addressed this matter in full and there’s nothing more that I can add”.

The spotlight on Zahawi’s tax affairs capped a challenging week for the Prime Minister, who was fined by police for not wearing a seatbelt in the back of a moving car.