Pressure is mounting on Adhim Zahawi after admitting he made a payment to HM Revenue and Customs following a “careless and not intentional” tax error relating to a shareholding in YouGov.
The embattled Tory party chairman issued a statement on Saturday “to clear up some confusion about my finances” after it was reported he had paid HMRC a seven-figure sum to end the dispute.
But the statement raised further questions, including whether Zahavi had negotiated the agreement while serving as chancellor and in charge of the country’s taxation.
The claims about Mr Zahavi’s tax affairs began to emerge when he was appointed chancellor by Boris Johnson last summer, amid reports Cabinet Office officials alerted the then prime minister to the HMRC controversy.
Mr Zahavi, who joins Rishi Sunak’s cabinet, did not disclose the size of the settlement – reported to be an estimated £4.8 million including a 30% fine – or confirm whether he has paid the fine.
He denied allegations that he avoided tax by using an offshore company registered in Gibraltar to hold shares in YouGov.
Tax lawyer Dan Needle, who was working to uncover the minister’s tax affairs, estimated that £3.7 million in capital gains tax was owed on the shares, which were eventually sold for £27 million.
In an unusual move, Mr Zahavi did not take founding shares when setting up YouGov, saying in his statement that his father had taken the shares “in exchange for some capital and his invaluable guidance”.
He continued: “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, although they disagreed about the exact allocation. They concluded that this was a ‘negligent and not intentional’ error.
“So that I could focus on my life as a public servant, I decided to settle the matter and do what he said was due, which was the right thing to do.”
HMRC agreed that it had never set up an offshore structure including Childshore Investments, “and I am not a beneficiary of Childshore Investments,” Mr Zahavi said.
He said the matter had been resolved and that all his tax matters were “up to date” when Mr Sunak was appointed Conservative Party chairman in October.
But the prime minister is facing questions about what he knew about the matter and when, as well as calls for Mr Zahavi to be sacked.
Mr Sunak’s promise of a premiership of “honesty” was thrown into disarray earlier this week after he was fined by police for not wearing a seatbelt and criticized for the allocation of leveling-up funding.
Downing Street said it had nothing to add to Mr Zahawi’s statement and confirmed the prime minister had confidence in him as Tory chairman.
Opposition parties have called for an independent investigation as well as the publication of all Mr Zahavi’s correspondence with HMRC.
Rishi Sunak needs to remove Nadim Zahavi as party chairman and set the record straight immediately – including what he knew about Zahavi’s investigation
Labor Party chair Anneliese Dodds said: “Nadim Zahawi still needs to explain when he found out about the investigation, and whether he was chancellor and in charge of our tax system at the time.
“They need to explain why their legal representatives said their cases were updated in December last year, only to be fined £1 million this month.
“And he needs to explain why he was using threats and intimidation legal action last year to shut down legitimate questions from tax experts.
“Rishi Sunak needs to remove Nadim Zahavi as party chairman and set the record straight immediately – including what he knew about Zahavi’s investigation at the time.”
Daisy Cooper, deputy leader of the Liberal Democrats, said: “Zahavi and his Conservative cabinet colleagues are arrogantly trying to brush this under the carpet.
“There are facts that still need to be established so there should be an independent inquiry to get to the bottom of this.”
(translating to tag) Nadim Zahawi