Rishi Sunak has sacked Nadhim Zahawi following the conclusion of an ethics inquiry and several days of intense pressure.
The Prime Minister dismissed the Tory Party chairman who was also in the Cabinet as minister without portfolio, saying that with the inquiry concluded “it is clear that there has been a serious breach of the ministerial code”.
The controversy had centred on a tax bill over the sale of shares in YouGov, the polling firm Mr Zahawi founded. The shares, worth an estimated £27 million, were held by Balshore Investments, a company registered offshore in Gibraltar and linked to Mr Zahawi’s family.
The controversy predated Mr Sunak’s premiership, but as more information emerged in the media, the Prime Minister ordered an investigation by his independent adviser on ministers’ interests, Sir Laurie Magnus.
Those findings were published on January 29, 2023, and set out a clear timeline, previously not fully known, of events that had been taking place.
– April 2021
Sir Laurie said HM Revenue and Customs (HMRC) interactions with Mr Zahawi over the tax issue began in April 2021, when he was a business minister.
– June 2021
Mr Zahawi and his advisers met with officials from HMRC in June 2021, according to Sir Laurie.
The ethics adviser said: “Mr Zahawi has told me that he had formed the impression that he and his advisers were merely being asked certain queries by HMRC concerning his tax affairs.”
– July 5 2022
Mr Zahawi becomes Chancellor of the Exchequer.
According to Sir Laurie’s findings, after his appointment Mr Zahawi completed a declaration of interests form, but it “contained no reference to the HMRC investigation”.
“A later form acknowledged (by way of an attachment) that Mr Zahawi was in discussion with HMRC to clarify a number of queries,” Sir Laurie added.
– July 9 2022
The Independent reports that HMRC officials were investigating Mr Zahawi and his tax affairs.
The Observer newspaper also reports that a “flag” was raised by officials about the financial affairs of the Tory MP 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 that he was being “smeared”.
“I was clearly being smeared. I was told that the Serious Fraud Office, the National Crime Agency, HMRC, were looking into me.
“I’m not aware of this. I’ve always declared my taxes – I’ve paid my taxes in the UK,” he said.
Sir Laurie said Mr Zahawi did not correct the record until January 21 2023, and concluded: “I consider that this delay in correcting an untrue public statement is inconsistent with the requirement for openness.”
– July 15 2023
Mr Zahawi received a letter from HMRC, which according to the account he provided to the investigation much later, changed the then-chancellor’s view.
The “impression that he and his advisers were merely being asked certain queries by HMRC concerning his tax affairs” had “persisted until he received a letter from HMRC on 15th July 2022 (dated 13th July)”, Sir Laurie said of Mr Zahawi’s account of the matter.
The ethics adviser said that after the letter, Mr Zahawi updated his declaration of interests form, acknowledging that his tax affairs were under investigation, but “provided no further details other than the statement made previously that he was clarifying queries”.
“An HMRC investigation of the nature faced by 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 resolved that tax was owed and a penalty should be applied, with a resolution “in principle” in August, and a “final settlement” signed in September, according to the ethics adviser.
And Sir Laurie added: “Mr Zahawi failed to update his declaration of interest form appropriately after this settlement was agreed in principle in August 2022.”
Mr Zahawi was replaced as chancellor when Liz Truss became prime minister on September 6, moving to the Cabinet Office.
– October 2022
Mr Zahawi “failed to disclose relevant information” about the investigation and his penalty during the appointments process for new roles in Government in September and October, according to the ethics adviser.
Sir Laurie said: “Without knowledge of that information, the Cabinet Office was not in a position to inform the appointing prime minister.”
– January 14 2023
The Sun on Sunday reported that Mr Zahawi had agreed to pay several million pounds in tax to settle a dispute with HMRC.
A spokesman for the Conservative Party chairman said that his taxes were “properly declared”, that he “has never had to instruct any lawyers to deal with HMRC on his behalf”, adding that “Mr Zahawi’s taxes are properly declared and paid in the UK”.
– January 16 2023
Mr Zahawi submitted his declaration of interests form in relation to his role as minister without portfolio and Conservative Party chairman, and included detail of the outcome of the HMRC investigation, according to the independent ethics adviser.
But Sir Laurie added: “At the time of my investigation this declaration was under consideration by the permanent secretary and had yet to be submitted onward to me for consideration.
“Given the seriousness of this matter, I would have expected Mr Zahawi to attend to his submission much more rapidly and… to have notified Cabinet Office officials at the time of his appointment.”
– January 18 2023
The Prime Minister and Downing Street defend Mr Zahawi over the allegations.
At Prime Minister’s Questions, Mr Sunak said the Tory chairman “has already addressed this matter in full and there’s nothing more that I can add”.
Downing Street said Mr Sunak had full confidence in the Stratford-on-Avon MP, having taken him “at his word” over the matter.
– January 19 2023
Labour wrote to HMRC over Mr Zahawi’s tax affairs, claiming that the “public requires answers”.
HMRC said it cannot comment on identifiable taxpayers.
– January 20 2023
The Guardian newspaper reported that Mr Zahawi paid a 30% penalty as part of the dispute, with estimates that he paid £4.8 million in total.
Labour called on Mr Zahawi to be sacked.
– January 21 2023
Mr Zahawi admitted paying a settlement to HMRC after a “careless and not deliberate” tax error related to his father’s shareholding in YouGov.
He said that when he set up the YouGov polling company in 2000, his father took founder shares.
“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.”
Mr Zahawi said the matter was resolved and “all my tax affairs 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 PM acknowledged that “clearly in this case there are questions that need answering”.
– January 24 2023
Tory MP Caroline Nokes, chairwoman of the Commons Women and Equalities Committee, suggested Mr Zahawi should “stand aside” as party chairman “until this matter is all cleared up”.
– January 25 2023
Mr Sunak was grilled by Labour leader Sir Keir Starmer about Mr Zahawi during Prime Minister’s Questions.
Mr Sunak told the Commons that while it would have been “politically expedient” to sack the Tory chair, “due process” meant that the investigation into his tax affairs should be allowed to conclude.
He also acknowledged that he had not been given 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 received informal advice in October that there could be a reputational risk to the Government from Mr Zahawi and his tax affairs.
The Observer newspaper, citing sources, said that government officials gave the new Prime Minister informal advice as he drew up his Cabinet in October regarding the risks from the HMRC investigation settled only months earlier.
A Number 10 spokesperson said: “These claims are not true.”
– January 29 2023
Mr Sunak sacked Mr Zahawi as Conservative Party chairman after the ethics inquiry found a “serious breach” of the ministerial code.
Sir Laurie’s four-page report found that the 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 honest, open and an exemplary leader through his own behaviour”.
Sir Laurie also said an individual subject to the HMRC process faced by Mr Zahawi should have understood at the outset that they were under investigation.
He also concluded: “I consider that by failing to declare HMRC’s ongoing investigation before July 2022… Mr Zahawi failed to meet the requirement… to declare any interests which might be thought to give rise to a conflict.”
Mr Sunak, in his letter to Mr Zahawi sacking him, said: “It is clear that there has been a serious breach of the ministerial code.”
Mr Sunak also said Mr Zahawi “should be extremely proud” of his “wide-ranging achievements in Government over the last five years”.
In his reply, Mr Zahawi did not explicitly mention the findings of the ethics inquiry. Instead, he outlined his concern at “the conduct from some of the fourth estate in recent weeks” – a reference to the press.
He also suggested that he will continue as an MP, saying: “You can be assured of my support from the backbenches in the coming years.”
Both Labour and the Liberal Democrats said it is vital that the public gets answers about what and when Mr Sunak knew about the controversy.