Nadhim Zahawi’s future as Tory party chairman looked in increasing jeopardy on Thursday as Britain’s tax chief suggested the former chancellor would not have been given a penalty for making an “innocent” mistake in his declarations. Cabinet minister Mr Zahawi is insisting he has not done anything wrong, saying he made a “careless” not a “deliberate” mistake in his tax affairs.
The affair is now being investigated by Prime Minister Rishi Sunak’s ethics adviser Sir Laurie Magnus who is looking at whether the party chairman may have breached the ministerial code. The storm was threatening to overshadow Mr Sunak as he was holding his Cabinet at Chequers today in a bid to reboot his Government ahead of an expected general election next year.
Mr Zahawi has admitted he settled a dispute which is reported to have included a penalty payment of about £1 million. Mr Zahawi says he has acted properly throughout. Asked about the meaning of “carelessness” in tax terms when he appeared before the public accounts committee, Jim Harra, chief executive and First Permanent Secretary at HM Revenue and Customs, told MPs: “I’m not commenting on anyone in particular’s personal affairs. But carelessness is a concept in tax law. It can be relevant to whether people are liable to a penalty and if so what penalty they would be liable for an error in their tax affairs.
“So if you take reasonable care but nevertheless make a mistake, whilst you will be liable for the tax and for interest if it’s paid on it, you would not be liable for a penalty. There are no penalties for innocent errors in your tax affairs.”
Deputy Prime Minister Dominic Raab is also facing a probe into eight formal complaints of alleged bullying at three departments where he was in charge.
With Mr Sunak under siege over the “sleaze” allegations, he yesterday rejected demands from Labour to sack Mr Zahawi now, insisting it was right that Sir Laurie should be allowed to complete his investigation.
Speaking on LBC this morning, Lord O’Donnell, former cabinet secretary to Tony Blair, Gordon Brown and David Cameron, backed Mr Sunak’s pledge to put integrity and accountability at the heart of his premiership.
But he added: “There are serious questions out there about the behaviour of ministers, and they need to be answered. And the public needs to see that action is taken.” Sir Laurie is investigating whether Mr Zahawi may have breached the ministerial code by failing to declare his tax dispute with HMRC when he was appointed to Mr Sunak’s Cabinet.
Mr Sunak had defended the former chancellor, insisting at PMQ’s last week that the matter had been dealt with in full. But the Prime Minister is now facing uncomfortable questions over what he knew at the time of his decision to appoint Mr Zahawi to his Cabinet and whether civil servants failed to brief him on the dispute with HMRC.
On Wednesday night, Work and Pensions Secretary Mel Stride suggested the investigation by Sir Laurie into Mr Zahawi could be wrapped up in 10 days.
He told ITV’s Peston programme: “We will in around, it sounds like 10 days’ time or thereabouts, hear from the ethics adviser, who will report to the Prime Minister, the Prime Minister will then have the facts and be able to make exactly those judgements.”
Mr Zahawi was set to attend the Cabinet meeting at Chequers today, during which Tory elections strategist Isaac Levido was expected to deliver a presentation on the Conservatives’ election chances. With Labour enjoying a 22-point lead in recent polls, Mr Levido is reported to believe there is a narrow path to victory but only if the Tory party can end its infighting and focus on voters’ needs. However, the probes into Mr Zahawi and Mr Raab could hang over the Prime Minister for weeks.
