Tory chair Nadhim Zahawi ‘missed out on knighthood in New Year’s Honours due to tax row’ as Labour demands probe after it emerged settlement with HMRC over ‘careless’ error happened while he was Chancellor

• Nadhim Zahawi facing questions about settlement with HMRC over tax affairs
• Tory chair has revealed he made payment over ‘careless’ not deliberate error
• Claims that Mr Zahawi was missed off New Year’s Honours list due to the row 

Nadhim Zahawi was blocked from a knighthood in the New Year’s Honours list due to his tax affairs, it was claimed today.

The Tory chair is facing fresh questions after finally releasing a statement to clear up ‘confusion’ over a significant settlement with HMRC.

Mr Zahawi is understood to have made a payment to the tax authorities – reported to be well into seven figures – while Chancellor at the end of Boris Johnson’s reign.

But the Cabinet minister insisted both sides agreed that the issues with his tax had been ‘careless’ rather than deliberate. 

Labour is demanding an independent probe into the revelations. However, Foreign Secretary James Cleverly stressed Mr Zahawi’s background as an entrepreneur in an interview this morning, and said he believes his colleague will stay in post.  

The Sun on Sunday said Mr Zahawi – founder of polling firm YouGov – had been put forward for a knighthood in the recent honours process, but did not feature on the final list.

A source close to the former vaccines minister said: ‘Nadhim is very proud to have run the UK’s world-beating vaccine rollout, and reopened schools during Omicron.

‘And it was the honour of his life to coordinate Her Majesty’s funeral when in the Cabinet Office. He did those things to serve the country he loves and that is reward enough.’

A Westminster source familiar with the process told MailOnline: ‘These faceless apparatchiks go around awarding themselves every honour under the sun at the drop of a hat. 

‘But when someone leads the only two successes of the State in recent hears, in vaccines and Her Majesty’s funeral, some pen-pusher decides to block recognition of true achievement because of some technical accounting point. It’s shameful’ 

Nadhim Zahawi is facing fresh questions after finally releasing a statement to clear up ‘confusion’ over a significant settlement with HMRC

Mr Zahawi is understood to have made a payment to the tax authorities – reported to be well into seven figures – while Chancellor at the end of Boris Johnson’s reign

Mr Zahawi did not disclose the size of the HMRC settlement – reported to be an estimated £4.8 million including a 30 per cent penalty – or confirm whether he paid a fine.

He denied allegations that he avoided tax by using an offshore company registered in Gibraltar to hold shares in YouGov.

Mr Zahawi did not take founder shares when he set up YouGov, saying in his statement that his father took 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, 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.’

HMRC agreed that he had never set up an offshore structure, including Balshore Investments, ‘and that I am not the beneficiary of Balshore Investments,’ Mr Zahawi said.

He added that the matter was resolved and that all his tax affairs were ‘up to date’ when he was appointed Conservative party chairman by Mr Sunak in October.

Sources stressed that there was no ‘negotiation’ with HMRC, and Mr Zahawi merely ordered his accountants to pay what the tax authorities asked in order to clear the matter up. 

A source told The Sun on Sunday: ‘Nadhim had been put forward for a knighthood. As part of the normal due diligence, Cabinet officials contacted HMRC in December.

‘Nadhim subsequently did not appear on the list in the New Year.’

The Cabinet Office refuses to comment on individual honours cases. 

Rishi Sunak is facing questions over what he knew about the matter, as well as calls to sack Mr Zahawi.

The PM’s promise to restore ‘integrity’ to government was dealt a blow last week after he was fined by police for not wearing a seatbelt and criticised for the allocation of Levelling Up funding.

Downing Street said it had nothing to add to Mr Zahawi’s statement and confirmed that the Prime Minister had confidence in him as Tory chairman.

Opposition parties have demanded an independent probe as well as the publication of all of Mr Zahawi’s correspondence with HMRC.

Rishi Sunak (pictured) is facing questions over what he knew about the matter, as well as calls to sack Mr Zahawi

Labour party chairwoman Anneliese Dodds said: ‘Nadhim Zahawi still needs to explain when he became aware of the investigation, and if he was chancellor and in charge of our tax system at the time.

‘He needs to explain why his legal representatives said his affairs were up to date in December last year only for him to settle a million-pound fine this month.

‘And he needs to explain why he was using threatening and intimidating legal action to shut down legitimate questions from tax experts last year.

‘Rishi Sunak needs to remove Nadhim Zahawi as party chair and set the record straight immediately – including about what he knew about the investigation into Zahawi at the time.’

Liberal Democrat deputy leader Daisy Cooper said: ‘Zahawi 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 must be an independent investigation to get to the bottom of this.’

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