That’s the obvious inference of this astonishing story in today’s Sun. On the face of it, this confirms my investigation in July that concluded Zahawi had avoided around £4m in tax by arranging for his founder shares in YouGov to be held by a subsidiary of his father’s offshore trust.
Zahawi denies the Sun’s story, but in a curiously specific way: he “never had to instruct any lawyers to deal with HMRC on his behalf”.
If the Sun is right, what would have happened?
It’s reasonably clear there wasn’t a pre-existing enquiry into YouGov – Zahawi explicitly denied this and (more convincingly) around the same time I received confirmation from HMRC (in response to an FOIA request) that no ministers were under enquiry.
So I would speculate that, when my investigation broke in July, Zahawi instructed accountants to look into his old YouGov structure. They told him that he was bang to rights; he then made a disclosure to HMRC with the aim of making swift payment in full to avoid an enquiry. If so, that might help explain the apparent speed with which a settlement was reached. Typically an HMRC enquiry involving a large amount involves years of negotiation, and HMRC has strict governance processes that they must comply with. I had expected HMRC would respond to my story by starting an investigation, and then by opening an enquiry around the end of 2022 – but if Zahawi had convincingly paid up in full by then, no enquiry would ever be opened.
That is, however, just speculation. The payment could relate to some other matter – perhaps the mysterious NCA/HMRC investigation which was reported by the Independent, which (according to the Guardian) caused a “red flag” to be raised when Zahawi was appointed Chancellor. Zahawi denied this – but it was always a meaningless denial, because there’s no reason he would know he was under investigation. It was telling that the Cabinet Office, who could convincingly deny the “red flag” story, did not do so.
Or the Sun could be wrong. That feels unlikely – it’s a big risk for them to run the story unless they were sure. I’ll keep an open mind – let’s see if we get any more convincing denials out of Mr Zahawi.
UPDATE: new story from the Independent, with the interesting addition that Zahawi’s spokespeople don’t seem to be denying the story. They just repeat his usual boilerplate about his taxes being properly declared and paid. That rather begs the question of whether they’re only properly declared and paid because he approached HMRC to disclose a previous under-payment of tax)
So what’s going on? If this was a boring ordinary course self assessment payment of tax then presumably Zahawi would say so?
And if it wasn’t… what was it?
More to follow.
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11 responses to “Did Nadhim Zahawi pay up to avoid an HMRC enquiry over YouGov?”
It seems that Zahawi is playing at par for the course that is the current Conservative Party.
The current P.M. became Chancellor in 2019. He set taxes for all of us while failing to disclose that his wife is a non-dom and wouldn’t be paying tax on any of her (unremitted) foreign-source income.
The news leaked only when BoJo or one of his acolytes decided that they need to torpedo Sunak’s ambitions for promotion.
The curious issue re Sunak involves the green cards. If Madame Sunak is honest in her dealing with the IRS (and there’s no reason to suppose otherwise), she would have had to declare her worldwide income to IRS and pay up accordi9ngly. If, as I suspect, the non-dom status was applied for only to avoid a double tax scenario of the dividends from Infosys, it makes sense that she would surrender her green card while paying tax in the UK on the dividends.
All this shows is the same thing the green cards show: first preference for loyalty in the Sunak family is to Uncle Sam with poor old Britannia trailing a sorry second.
If,the tax was due on the share transfer, then this is evasion and not avoidance.
Criminal vs smart tax planning.
Given that you forced him to disclose this to hmrc by making it public, does he still risk a criminal prosecution and penalties for non disclosure?
It’s only evasion if he was dishonest. If he simply didn’t know what he was doing then it’s not. But I tend to agree that, if it played out as I think it did, this wasn’t avoidance – it was an unlawful failure to pay tax that was due.
If Zahawi is presumably implying 1) that a lack of knowledge of trust law, together with 2) somehow (despite his millions) lack of accurate professional advice, led to 3) an accidental failure to understand that he’d set up a sham trust which he 4) controlled and 5) was a beneficiary of despite 6) clearly the trust paying for x y and z on his behalf – then if these seemingly inconsistent and contradictory positions accurately portray Zahawi’s public stance, can they be reconciled in a way that leaves his honesty intact, and are they compatible with the requirements of the Ministerial Code and the criminal law?
to be fair, he was not wealthy when he established YouGov, and I would speculate from the amateur nature of the planning that he was not well-advised, and perhaps not advised at all.
Ah – I’m reminded of the words of my trusts lecturer as to the the lesson of the pretty tragic Vandervell’s Case: when setting up a trust, don’t have an accountant do it!
Very clearly put, thanks.
Can you clarify what the screenshot of the response from the HMRC FOI team is getting at? They say the number is “not zero” which implies there are ministers under investigation?
you’re right – I posted the wrong response – my apologies. They then said the number was in fact zero. I’ll correct!
If the payment was made in 2022 that would coincide nicely with the sale of his London house in 2021 https://themovemarket.com/tools/propertyprices/6-bristol-gardens-london-sw15-3tg
Doesn’t CGT on sale of real estate have to be paid within 60 days? Also, if it was something simple like that, surely Zahawi’s spokesperson would have said so?