Nadhim Zahawi tax row: What did the Tory MP do?


Nuray Bulbul
Wed, 25 January 2023 

Labour called Nadhim Zahawi’s position ‘untenable’ (Victoria Jones / PA Wire)

Despite calls for his resignation by the Labour Party and an investigation by the Prime Minister, following the revelation of data surrounding a multi-million pound tax battle, Nadhim Zahawi is adamant he will continue as chairman of the Conservative Party.

While Zahawi was chancellor, he paid a penalty to HMRC over unpaid tax, and described the error as “careless and not deliberate”.

Penalties are applied if someone does not pay the correct tax at the right time.

Labour is pleading with Rishi Sunak to “come clean” about his knowledge of the deal and called Zahawi’s position “untenable”.

Who is Nadhim Zahawi?

Nadhim Zahawi, a former child refugee who left Iraq with his parents in the 1970s, is the co-founder of the prosperous online polling company YouGov.

After winning the 2010 election for the Conservative Party's Stratford-on-Avon seat, he is currently regarded as one of the wealthiest members of the House of Commons.

He became well-known for his work as the pandemic's vaccines minister, and he eventually held the position of education secretary.

Following Sunak's resignation, he became chancellor under Boris Johnson from July to September 2022.

He was appointed chancellor of the duchy of Lancaster, minister for equalities, and minister for intergovernmental relations before Liz Truss took over as prime minister.

Rishi Sunak will come under fresh pressure over Nadhim Zahawi as he resists firing the Tory Party chairman

What’s the Zahawi tax row about?

After it was revealed that the former chancellor, who still attends the cabinet, agreed to pay millions to HMRC in December following a settlement with the tax agency, he has been extensively questioned in Parliament and the media in recent days.

The Guardian reported Zahawi agreed to pay a penalty of £5m to HMRC as part of a seven-figure settlement over his tax affairs.

A source familiar with the payment told the paper a penalty was triggered as a result of a non-payment of capital gains tax due after the sale of shares in YouGov, the polling company Zahawi co-founded in 2018. He could have been subject to larger penalties had he not reached a settlement towards the end of last year, the source claimed.

Based on the capital gains tax incurred by the selling of successive tranches of shares in YouGov, valued at more than £20 million, which resulted in transfers of money to Zahawi, experts estimate the tax owed was around £3.7 million.

According to reports, HMRC added a 30 per cent penalty to the £3.7 million, making the total amount owed £4.8 million. This is thought to have increased the final payment to more than £5m when combined with interest fees that HMRC also assesses on taxes owing.

However, Zahawi’s spokeperson has denied these claims.

In reference to the total amount paid to HMRC, the spokesperson said: “Nadhim Zahawi does not recognise this amount… As he has previously stated, his taxes are properly declared and paid in the UK.”

The BBC reported the dispute was resolved between July and September last year.

Zahawi was in charge of the UK’s tax system in his previous role as chancellor, during which time he said he made great efforts to ensure that taxes are paid in full and on schedule.
How does HMRC deal with wealthy taxpayers?

HMRC defines wealthy people as having incomes of £200,000 or more.

The interactions that very affluent persons and their agents have with HMRC differ noticeably from those of regular taxpayers or accountants, who frequently encounter lengthy waiting times via understaffed helplines. Mail backlogs have also made it difficult for people to understand if they need to file a self-assessment return or resolve tax disputes.

Zahawi's representative received a fast-track path with a direct case manager within HMRC, as is typical for other rich individuals. It is believed that this manager is a member of the Wealthy Team at HMRC.

How have the Tories reacted?

The Conservative Party demanded an investigation earlier this week to determine whether Zahawi violated the ministerial code or deceived the public about his tax troubles.

On BBC Radio 4 last week, Michael Gove defended Zahawi, saying: “My firm understanding is HMRC have no quibble with Nadhim. He’s paid everything that he should, and people paying their taxes, that’s not a story – people not paying their taxes, yeah that is a problem.”

Last week, Labour Party Chair Anneliese Dodds wrote to Sunak stating that, if Conservative Party Chair Zahawi does not adequately explain why he paid millions of pounds in tax to HMRC, then there should be an enquiry.

This week, the Prime Minister has opened an investigation into whether Zahawi breached the ministerial code - which Zahawi has welcomed and says he looks forward to “explaining the facts”.