Nadhim Zahawi's seven breaches and an investigation that leaves unanswered questions
Nadhim Zahawi breached the Ministerial Code seven times during the row over his tax affairs, an investigation by Sir Laurie Magnus, the new ethics adviser, has concluded.
But allies of the former party chairman say questions remain over the way the investigation was conducted - and whether Mr Zahawi was fairly heard.
In his four-page report, released on Sunday morning, the adviser said Mr Zahawi should have known that HMRC was investigating his tax affairs in April 2021, especially as he had a face-to-face meeting with HMRC two months later.
But the then vaccines minister did not declare the investigation, believing he was "merely being asked certain queries by HMRC concerning his tax affairs".
Sir Laurie concluded: “Mr Zahawi should have understood at the outset that they were under investigation by HMRC and that this was a serious matter.”
He added that the investigation by HMRC was a "relevant matter for a minister to discuss and declare as part of their declaration of interests" and that Mr Zahawi would have been expected to "proactively" update his form, which he failed to do.
— Nadhim Zahawi (@nadhimzahawi) January 29, 2023
Mr Zahawi did not declare the investigation in October 2021, when he was promoted to the role of education secretary.
Sir Laurie said: “I consider that by failing to declare HMRC’s ongoing investigation before July 2022 - despite the ministerial declaration of interests form including specific prompts on tax affairs and HMRC investigations and disputes - Mr Zahawi failed to meet the requirement to declare any interests which might be thought to give rise to a conflict."
The independent adviser on ministerial interests says another breach occurred when Mr Zahawi was appointed to the role of Chancellor on July - and again did not disclose the HMRC investigation.
Sir Laurie said: “Only following receipt of HMRC’s letter received on 15th July 2022 (dated 13th July), did Mr Zahawi update his declaration of interests form to acknowledge that his tax affairs were under investigation.
"But he provided no further details other than the statement made previously that he was clarifying queries."
Sir Laurie pointed out it was a particularly "relevant interest" during his time in No 11. He noted the HMRC dispute could "give rise to a conflict, and particularly so in the case of HM Treasury Ministers and the Chancellor of the Exchequer, who has responsibility for the UK tax system".
One week later Mr Zahawi responded to a story in the Independent and elsewhere that he was being investigated by HMRC, saying that the stories were “inaccurate, unfair and are clearly smears”.
Sir Laurie gave Mr Zahawi's argument that he was merely "answering HMRC's queries" short shrift, adding: "I consider that an individual subject to the HMRC process faced by Mr Zahawi should have understood that they were under investigation by HMRC and that this was a serious matter."
He concluded his subsequent failure to correct an "untrue public statement" until January 21 the following year was "inconsistent with the requirement for openness".
Mr Zahawi reached an agreement in September after an in-principle agreement the previous month, when he was still at No 11.
Sir Laurie concluded that Mr Zahawi "failed to update his declaration of interest form appropriately after this settlement was agreed in principle in August 2022... It was not until mid-January 2023... that details of the earlier HMRC investigation and its outcome were declared."
However, this is where allies of Mr Zahawi dispute the ethics adviser’s conclusions.
They say that the then Chancellor told Sir Tom Scholar, theTreasury permanent secretary, the full story about HMRC - including that he had paid a penalty. They question why this is not mentioned in Sir Laurie’s report.
Although it is not known whether Sir Tom passed on what he had been told to the Cabinet Office, Mr Zahawi is said to believe the Cabinet Office were in the picture when Mr Sunak made him Tory chairman last October.
Sir Laurie claims Mr Zahawi failed to disclose the nature of the HMRC investigation or the penalty when he was appointed chancellor of the duchy of Lancaster in September 2022, after Boris Johnson resigned.
However, Mr Zahawi’s allies claim his ministerial register of interests was up to date in September, when Ms Truss appointed him.
According to Sir Laurie, Mr Zahawi did not disclose the nature of the HMRC investigation or penalty when Mr Sunak made him party chairman in October.
He said: “Mr Zahawi failed to disclose relevant information - in this case the nature of the investigation and its outcome in a penalty - at the time of his appointment, including to Cabinet Office officials who support that process.
"Without knowledge of that information, the Cabinet Office was not in a position to inform the appointing Prime Minister."
While Sir Laurie’s damning report has seemingly put an end to his Cabinet career, it appears that Mr Zahawi’s allies are not inclined to let the matter lie.