ishi Sunak has fired Nadhim Zahawi after the conclusion of an ethics investigation and several days of intense pressure.
The prime minister sacked the Tory party chairman, who was also in cabinet as a minister without portfolio, saying after the investigation “it is clear that there has been a serious breach of the ministerial code”.
The controversy had centered on a tax bill over the sale of shares in YouGov, the polling station Mr Zahawi had set up. The shares, valued at an estimated £27 million, were held by Balshore Investments, a company registered off the coast of Gibraltar with links to Mr Zahawi’s family.
The controversy predated Sunak’s premiership, but as more information emerged in the media, the prime minister ordered an inquiry by his independent adviser on the interests of ministers, Sir Laurie Magnus.
Those findings were published on Jan. 29, 2023, and include a clear timeline, previously not fully known, of events that had occurred.
– April 2021
Sir Laurie said HM Revenue and Customs (HMRC) interactions with Mr Zahawi on the tax issue began in April 2021 when he was Home Secretary.
– June 2021
According to Sir Laurie, Mr Zahawi and his advisers met with HMRC officials in June 2021.
The ethics adviser said: “Mr Zahawi told me he had the impression that he and his advisers were only getting certain questions from HMRC about his tax affairs.”
– July 5, 2022
Mr. Zahawi becomes Minister of Finance.
According to Sir Laurie’s findings, Mr Zahawi completed a declaration of interest after his appointment but “contained no reference to the HMRC investigation”.
“A later form confirmed (through an attachment) that Mr Zahawi was in discussions with HMRC to clarify a number of questions,” added Sir Laurie.
– July 9, 2022
UKTN reports that HMRC officials were investigating Mr Zahawi and his tax affairs.
The Observer newspaper also reports that officials raised a “flag” over the Tory MP’s financial affairs before he was promoted to the high-profile role that included responsibility for HMRC.
– July 11, 2022
In an interview with Sky News, Mr Zahawi said he was “smeared”.
“I was clearly smeared. I was told the Serious Fraud Office, National Crime Agency, HMRC, were investigating me.
“I am not aware of this. I have always declared my taxes – I paid my taxes in the UK,” he said.
Sir Laurie said Mr Zahawi did not correct the record until January 21, 2023, concluding: “I am of the opinion that this delay in correcting an untrue public statement is inconsistent with the requirement of openness.”
– July 15, 2023
Mr Zahawi received a letter from HMRC which, according to the report he provided to the inquiry much later, changed the opinion of the then chancellor.
The “impression that he and his advisers were only being asked certain questions by HMRC about his tax affairs” was “held until he received a letter from HMRC on 15 July 2022 (dated 13 July)”, Sir Laurie said of Mr Zahawi’s account of the matter.
The ethics adviser said Mr Zahawi updated his declaration of interests following the letter, acknowledging that his tax matters were being investigated but “did not provide any further details beyond the previously made statement that he clarified questions”.
“An HMRC investigation of the nature facing Mr Zahawi would be a relevant matter for a minister to discuss and declare as part of their declaration of interests,” he said.
– August to September 2022
Mr Zahawi and HMRC decided that tax was due and a fine should be imposed, with a resolution “in principle” in August and a “final settlement” signed in September, the ethics adviser said.
And Sir Laurie added: “Mr Zahawi has not properly updated his Declaration of Interests after this settlement was agreed in principle in August 2022.”
Mr Zahawi was replaced as Chancellor when Liz Truss became Prime Minister on 6 September and moved to the Cabinet Office.
– October 2022
Mr Zahawi “has not released any relevant information” about the investigation and his sentence during the nomination process for new roles in government in September and October, the ethics adviser said.
Sir Laurie said: “Without knowledge of that information, the Cabinet Office was unable to inform the Prime Minister-elect.”
– January 14, 2023
The Sun reported on Sunday that Mr Zahawi had agreed to pay several million pounds in tax to settle a dispute with HMRC.
A spokesperson for the Conservative Party chairman said his taxes were “correctly declared”, that he “never had to instruct lawyers to deal with HMRC on his behalf”, adding that “Mr Zahawi’s taxes are correctly declared and paid in the UK”.
– January 16, 2023
Mr Zahawi submitted his declaration of interests in relation to his role as minister without portfolio and chairman of the Conservative Party, adding details of the outcome of the HMRC inquiry, UKTN ethics adviser said.
But Sir Laurie added: ‘At the time of my inquiry this statement was pending with the Permanent Secretary and had yet to be submitted to me for consideration.
“Given the seriousness of this matter, I would have expected Mr Zahawi to deal with his submission much more quickly and … to have notified Cabinet officials at the time of his appointment.”
– January 18, 2023
The Prime Minister and Downing Street are defending Mr Zahawi over the allegations.
When questioned by the prime minister, Mr Sunak said the Tory chairman “has already fully dealt with this matter and I have nothing more to add”.
Downing Street said Mr Sunak had full confidence in the Stratford-on-Avon MP, having taken him “at his word” on the matter.
– January 19, 2023
Labor wrote to HMRC about Mr Zahawi’s tax affairs, claiming that the “public needs answers”.
HMRC said it cannot comment on identifiable taxpayers.
– January 20, 2023
The Guardian newspaper reported that Mr Zahawi has paid a 30% fine as part of the dispute, with estimates that he paid a total of £4.8 million.
Labor called for Zahawi to be sacked.
– January 21, 2023
Mr Zahawi admitted that he had paid a settlement to HMRC after a “negligent and unintentional” tax error related to his father’s stake in YouGov.
He said that when he founded YouGov polling agency in 2000, his father took founding shares.
“Twenty-one years later, when I was appointed Secretary of the Treasury, questions arose about my tax affairs. I discussed this with the cabinet at the time.
“After discussions with HMRC, they agreed that my father was entitled to founder shares in YouGov, although they disagreed on the exact allocation. They concluded that this was a “careless and unintentional” error.
“In order to focus on my life as a civil servant, I chose to settle the matter and pay what they felt was due, which was the right thing to do.”
Mr Zahawi said the matter had been resolved and “all my tax matters were up to date” by the time he became Chancellor of the Duchy of Lancaster last September.
– January 23, 2023
Mr. Sunak ordered an investigation by his new ethics adviser into Mr. Zahawi.
The prime minister acknowledged that “in this case there are clearly questions that need to be answered”.
– January 24, 2023
Tory MP Caroline Nokes, chair of the Commons Women and Equalities Committee, suggested that Zahawi should “step aside” as party chairman “until this matter is fully clarified”.
– January 25, 2023
Mr Sunak was questioned about Mr Zahawi by Labor leader Sir Keir Starmer during the Prime Minister’s questions.
Mr Sunak told the House of Commons that while it would have been “politically expedient” to sack the Tory chairman, “due process” meant that the investigation into his tax affairs would have to be completed.
He also acknowledged that he had not gotten the full picture of Mr Zahawi’s tax affairs when he told MPs that the senior Conservative had given a “full” account.
Conservative peer Lord Hayward joined Ms Nokes in calling on Mr Zahawi to stand aside while the inquiry takes place, and senior Tory Tobias Ellwood said the situation was “a distraction”.
– January 28, 2023
Downing Street denied reports that Mr Sunak had received informal advice in October that there could be a reputational risk to the government over Mr Zahawi and his tax affairs.
The Observer, citing sources, said government officials gave informal advice to the new prime minister when he assembled his cabinet in October about the risks posed by the HMRC investigation, which had been completed just months earlier.
A spokesman for Number 10 said: “These claims are not true.”
– January 29, 2023
Mr Sunak sacked Mr Zahawi as chairman of the Conservative Party after the ethics review found a “serious breach” of the ministerial code.
Sir Laurie’s four-page report found that Mr Zahawi had shown “insufficient regard for the general principles of the Ministerial Code and the requirements in particular, under the Seven Principles of Public Life, to be fair, open and exemplary to be a leader by his own conduct”.
Sir Laurie also said that a person involved in the HMRC trial that Mr Zahawi was dealing with should have understood from the outset that they were under investigation.
He also concluded: “I believe that by not disclosing HMRC’s ongoing investigation before July 2022… Mr Zahawi failed to meet the requirement… to disclose interests that could be give rise to a conflict.”
Mr Sunak said in his letter to Mr Zahawi firing him: “It is clear that there has been a serious breach of the ministerial code.”
Mr Sunak also said that Mr Zahawi “should be extremely proud” of his “broad achievements in government over the past five years”.
In his reply, Mr. Zahawi did not explicitly mention the findings of the ethics review. Instead, he expressed concern about “the behavior of some of the Fourth Estate in recent weeks” – a reference to the press.
He also suggested he continue as an MP, saying: “You can be assured of my support from the backseat for years to come.”
Both Labor and the Liberal Democrats said it was vital that the public get answers about what and when Mr Sunak knew about the controversy.