Rishi Sunak has ordered his independent ethics adviser to look into Nadhim Zahawi's tax row as "clearly in this case there are questions that need answering".
The Tory Chairman and former Chancellor is desperately clinging onto his job amid warnings today that the row over his tax affairs has made his position "untenable".
Despite calls for him to quit, allies of the Cabinet Minister said he had no plans to resign after paying a multi-million pound penalty to resolve a dispute with HMRC.
It has emerged that he made the settlement - estimated to be around £5million - when he was presiding over the UK's tax policy as Chancellor last summer.
It comes amid a torrid few days for the Prime Minister who on Friday was issued with a fixed-penalty notice by the police after he posted a video to his Instagram not wearing a seatbelt.
The financial arrangements of his predecessor in No10 Boris Johnson have also hit the headlines with the BBC Chairman forced on Monday to order an internal inquiry into potential conflicts of interests amid claims he helped the ex-PM to secure a loan of up to £800,000.
Speaking today, the Prime Minister attempted to defuse the row over Mr Zahawi's tax affairs.
Mr Sunak revealed he had asked his independent adviser on ministers' interests Sir Laurie Magnus to examine the case.
On a visit to a hospital in Northamptonshire, the PM said: "Integrity and accountability is really important to me and clearly in this case there are questions that need answering.
"That's why I've asked our independent adviser to get to the bottom of everything, to investigate the matter fully and establish all the facts and provide advice to me on Nadhim Zahawi's compliance with the ministerial code.
"I'm pleased that Nadhim Zahawi has agreed with that approach and has agreed to fully co-operate with that investigation."
Mr Sunak made clear the Tory Chairman will remain in his role while the investigation is carried out, adding: "As is longstanding practice, he will continue to play the role he does."
In response, Mr Zahawi said: "I welcome the Prime Minister's referral of this matter to the independent adviser on ministerial standards. I look forward to explaining the facts of this issue to Sir Laurie Magnus and his team.
"I am confident I acted properly throughout and look forward to answering any and all specific questions in a formal setting to Sir Laurie.
"In order to ensure the independence of this process, you will understand that it would be inappropriate to discuss this issue any further, as I continue my duties as chairman of the Conservative and Unionist Party."
This morning a source close to Mr Zahawi did not answer questions on the penalty but said: "He is absolutely not resigning."
Mr Zahawi was spotted arriving at Tory HQ this morning, saying "Morning" to journalists waiting outside.
In a statement at the weekend, Mr Zahawi said he had made a "careless rather than deliberate error" related to shares in YouGov, the polling firm he co-founded.
He said he had settled the matter and his tax affairs were up to date when he was appointed as minister without portfolio and Tory chairman by Mr Sunak in October.
It has now come to light that the dispute was resolve between July and September last year and the total amount paid is about £5million, according to the BBC.
Mr Zahawi was Chancellor from July 5 to September 6 2022.
Speaking on Monday the Labour Keir Starmer told the Prime Minister to sack Mr Zahawi, saying it was "obvious" he could not remain in his role as Tory Chairman.
He added: "He clearly isn't going to resign and so the Prime Minister needs to show some leadership.
"This is a test of the Prime Minister. He promised us - his first words - integrity and accountability.
"Well, if those words mean anything, the Prime Minister should sack him, and sack him today and show some leadership.
"Because if he doesn't, it's just going to be further evidence, I think, for the British public, as to just how weak this Prime Minister really is."
Failing to sack Mr Zahawi would be a "strong failure of leadership" and "if this was somebody in my team, I would sack them", Mr Starmer added.
Responding to the probe, Liberal Democrat Deputy Leader Daisy Cooper MP added: "The gear-change from ‘nothing to see here’ to ordering a major ethics investigation in just a few days, puts Sunak’s own judgment in the spotlight once again.
"If Sunak won’t do the decent thing and sack Zahawi, the least he can do is suspend him for the duration of the investigation."
