Pressure grows on Nadhim Zahawi to explain his finances

Nadhim Zahawi, the new UK chancellor, is under pressure to explain his finances after it was reported that HM Revenue & Customs is carrying out an inquiry into his tax affairs.

HMRC is allegedly investigating Zahawi after being passed information by the National Crime Agency, which looked into the MP’s finances in 2020 but did not take any action, according to a report in the Independent newspaper.

News of the HMRC investigation — which has not been denied by the tax authority — is awkward because the organization comes under the auspices of the Treasury, which Zahawi now runs. The NCA has not commented on the claims.

The tax revelations also contradicts the HMRC’s insistence in June, when Zahawi was an education secretary, that there were no investigations taking place into any government ministers.

The Financial Times received a freedom of information reply from the HMRC on June 15 saying that between one and five ministers were being investigated by the tax authorities.

But on June 23 an HMRC spokesperson said that this had been a mistake and was “wrong”. “We currently have no tax inquiries into government ministers,” the spokesperson said.

Rachel Hopkins, the shadow Cabinet Office minister, urged the HMRC to “urgently come clean” about how many Tory ministers are under investigation.

“This apparent cover-up will shake public confidence and scrutiny of ministers’ financial dealings,” she said.

“The government said up to five ministers’ tax affairs were being investigated, then they said none were, but now we learn the chancellor is under active investigation. . . the public have a right to get to the truth about this whole murky business.”

On Sunday, one HMRC official admission that a minister is being investigated.

An HMRC spokesperson said: “We discovered that the information we had previously given was based on an incomplete review of the department’s records. Just human error.”

Zahawi, who has previously been linked to a company called Balshore Investments, based in Gibraltar, has denied any wrongdoing and said he would co-operate with any inquiries.

“There have been news stories over the last few days which are inaccurate, unfair and are clearly smears,” Zahawi said in a statement. “These smears have falsely claimed that the Serious Fraud Office, the National Crime Agency, and HMRC are looking into me. I am not aware of this. I have not been told that this is the case.”

He added that he had never been non-domiciled for tax purposes in the UK and said that if he became prime minister he would publish annual tax returns. “If there are questions, of course, I will answer any questions HMRC has of me,” he added.

Zahawi made his fortune as co-founder and chief executive of YouGov, a polling firm, and is estimated to have a fortune of close to £100mn

Balshore Investments has been previously described in YouGov annual reports as “the family trust of Nadhim Zahawi’s family”. The company owned a stake in the firm worth more than £20mn but had sold it by 2017-18. It is wholly owned by T&T Nominees Ltd, registered in Gibraltar, which manages trusts for clients.

Zahawi said he has never had an interest in Balshore Investments and that neither him nor his wife — nor their children — are beneficiaries. Instead, a spokesperson said that his father, Hareth Zahawi, owned Balshore, adding: “For information his father does not live in the UK.”

Balshore is not included in Zahawi’s entry in the register of members’ interests nor the register of ministers’ interests because it is owned by his father.

Dan Neidle, head of the think-tank Tax Policy Associates, has estimated that the YouGov shares held by Balshore were worth around £24mn. Neidle, former head of tax at law firm Clifford Chance, urged the chancellor to clarify the fine details of his tax affairs.

Richard Murphy, professor of accounting practice at Sheffield University, said: “It should be disclosed who are the beneficiaries of this trust, whether any money has been distributed and what tax has been paid.”

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