I never set out to investigate Nadhim Zahawi. I’d retired as the lucratively paid head of tax at a City law firm and founded a think tank, Tax Policy Associates. I’d then happily written a series of papers and reports that probably 20 people had read (but, I assured myself, the right 20 people). More importantly, I was, per the original plan, spending much more time with my family.
To the extent I thought about Zahawi at all, I thought him an impressive figure. He had arrived in the UK from Iraq as a child refugee, built a billion-dollar company from nothing and was now, aged 55, worth £100 million. He had been a highly competent vaccines minister — very possibly saving thousands of lives — and now, as of July 5 last year, he was chancellor of the exchequer. I vaguely remembered he’d written about tax avoidance in the past. In 2015, he tweeted: “Labour didn’t deal with tax avoidance for 13 years in government! We have introduced new tax avoidance laws just this month.”
But then I read an extraordinary report in The Independent newspaper that Zahawi had been the subject of an investigation by the National Crime Agency, the Serious Fraud Office and HM Revenue & Customs. Zahawi denied this — but would he necessarily know if he were being investigated?
Then other newspapers reported that before Zahawi’s appointment as chancellor, the Cabinet Office had raised a “red flag” about his tax affairs. This was not denied by the Cabinet Office.
Today Zahawi finally made a public statement, claiming he had merely made a “careless and not deliberate error”. He refused to put any figures on how much he had paid back, even though reports suggest it is £5 million.
But in any event, he would never have said a word and the public would be none the wiser about his tax had I not started digging into it last July. A Guardian article from 2017 said Zahawi was linked to a Gibraltar company called Balshore Investments, which held shares in YouGov — the all-conquering international polling firm Zahawi founded in 2000 with Stephan Shakespeare, now 65, a one-time teacher and former hopeful for a Conservative seat. I spent a thoroughly entertaining few days going through company accounts and Companies House filings, and made four interesting discoveries.
First, a filing error in a Companies House entry for an unrelated company revealed that Balshore was owned by a trust controlled by Zahawi’s parents.
Second, Balshore Investments didn’t hold just any old shares in YouGov. It held the founder shares, which normally Zahawi would have received himself. Legally there is nothing necessarily different about founder shares, but founders pay little or nothing for them because they’ve put in the “sweat equity” of establishing the company. So if you founded a company, you might reasonably take, say, 80 per cent of the shares. You need cash, so you find a friend who pays £1 million to subscribe for the other 20 per cent. You have founder shares; they don’t. Shakespeare held his founder shares in the usual way, and there is no suggestion he has done anything wrong.
This seemed odd. I spoke to lawyers and entrepreneurs who had seen hundreds of startups, and nobody could explain this arrangement.
Third, a chance disclosure in YouGov’s 2005 listing documents revealed that Balshore had made a £99,000 gift to Zahawi out of its YouGov dividends — direct evidence he benefited from the trust.
Fourth, because Balshore was based in Gibraltar, about £24 million of gains on its YouGov shares, plus dividends, went completely untaxed. By an extraordinary coincidence, at about that time Zahawi’s UK property business had received £26 million of unsecured loans from an undisclosed source.
For me, there was a potential explanation: Zahawi didn’t want to be taxed on profits on the YouGov shares, so he put them in the company owned by his parents’ trust. But he still regarded them as his assets, and so cash came back to him through gifts and loans. There are half-a-dozen tax rules designed to stop this sort of thing. And, if my theory were correct, one of them would apply to tax the dividends and capital gains. I reckoned about £3.7 million in tax should have been paid — but hadn’t.
Accusing the chancellor of the exchequer of avoiding tax was a daunting step. I spoke to many tax experts: accountants, solicitors, KCs and retired HMRC inspectors. Everyone agreed the arrangements were suspicious.
I published my findings on the Tax Policy Associates website on July 10, posted a thread on Twitter . . . and Twitter exploded. Zahawi denied everything. He said he hadn’t avoided tax and he had an explanation for Balshore holding the YouGov shares — he said his father had provided start-up capital and the shares were fair reward for that.
I spent more fun time going through all the documents and accounts, and concluded it wasn’t true. Neil Copp, an investor, provided £285,000 of start-up capital (there is no suggestion of wrongdoing by Copp). Balshore provided £7,000 — and that was two years later. So it wasn’t start-up capital at all.
I published these latest findings on July 13. Maybe Zahawi had made an innocent mistake — it was 22 years ago, after all — and a correction would be issued soon enough. Instead, the next day, he offered a new explanation: that he had been so inexperienced back then that he was completely dependent on his father’s “very significant contribution” to developing YouGov’s business plan, and that his father had provided ideas, business support and knowhow.
It’s hard to come by information on Nadhim Zahawi’s father, Hareth. Zahawi has mentioned Hareth “losing everything” to a failed investment when Zahawi was 18. Today, Hareth runs an Iraqi infrastructure business called Iraq Project & Business Development. He is said to live in Lebanon, and a number of journalists tried to find him in July to ask about Balshore. None was able to track him down.
Zahawi’s new explanation contradicted much of the public information about the history of YouGov, of which Zahawi was chief executive until 2010 (he now holds no role with the company). The Times approached YouGov and spoke to people who had been there at the start. Nobody recalled his father’s involvement, and YouGov issued a clear public denial of Hareth Zahawi’s involvement in the company. Nadhim Zahawi was able to find two former colleagues who said they recalled his father being kind and helpful — but that hardly justified taking all the founder shares.
I posted my view on the matter online: that Zahawi’s claim his father had provided start-up capital was wrong.
Saturday, July 16 was a particularly gorgeous summer’s day. I was watching my children swimming in a Norfolk lake when my phone buzzed. It was a Twitter direct message from a libel partner at Osborne Clarke, a law firm I’d heard was acting for Zahawi. He wanted to speak “off the record”. I told him he should put anything he had to say in writing — and that I would not accept “without prejudice” correspondence (which wouldn’t normally be permitted to be published).
So I was surprised to receive an email later that day from Osborne Clarke headed “without prejudice”. It demanded I retract my allegation of “dishonesty” that same day and said I couldn’t publish the email without “serious consequences”. It wasn’t a brilliantly constructed letter, and they either misunderstood or mis-stated what I’d said about Zahawi.
This just made me more confident I was on the right track. I did not retract. Instead, I posted another detailed explanation online of why I thought Zahawi was wrong. Osborne Clarke sent another email — again claiming to be confidential, and saying that publishing it would be improper.
I’d had enough. On July 22, I published both “confidential” emails and alerted the Solicitors Regulation Authority (SRA) to the fact that lawyers were sending secret libel letters. Saying that your libel threat is confidential and can’t be published is usually untrue — and the SRA agreed. On November 29, it sent out a general note warning solicitors to stop sending libel letters that falsely claim to be confidential. I referred Osborne Clarke to the SRA over its letters.
But all that was a diversion. I started looking back at other things Zahawi had said. On Sky News on July 11, the presenter Kay Burley asked him if he benefited from an offshore trust. “I don’t benefit from an offshore trust,” he said. “Nor does my wife. We don’t benefit at all from that.”
How could he say this, when there was evidence from YouGov itself that, on at least one occasion, he received £99,000 from the trust?
On September 12, I wrote to Zahawi’s lawyers again to ask if they now had any comment. They replied the next day: “You should not infer anything from our client’s desire not to engage with you, including to correct any misrepresentations you have made. Our client’s taxes are fully declared and paid in the UK and any allegation of tax evasion would be false and seriously defamatory.”
Despite all this, to my frustration, things began to go quiet. I’d made a series of quite technical accusations, which Zahawi had denied. His lawyers had written to newspapers. It was not an easy story for the media to cover — though The Sunday Times did run an interview with me in December. Zahawi’s strategy of saying nothing appeared to have triumphed. Until last Sunday, January 15, 2023.
The Sun on Sunday had a scoop: it reported that Zahawi had paid “several million pounds” to settle a dispute with HMRC, with the suggestion that the dispute centred on YouGov.
The newspaper carried a faintly hilarious non-denial denial from Zahawi’s spokesman stating that Zahawi had “never had to instruct any lawyers to deal with HMRC on his behalf”. This read to me like a tacit admission that the story was true but that Zahawi had instructed an accounting firm to do the work rather than lawyers. Other journalists followed up the story, pushing Zahawi’s people for comment — with no reply.
When asked about this by Labour MP Alex Sobel at prime minister’s questions on Wednesday, Rishi Sunak said his “honourable friend” had already addressed the matter in full, and there was nothing more Sunak could add.
I think the most likely scenario is that Zahawi panicked after I published my first findings about YouGov last July and went to HMRC to reach a speedy settlement to make the whole thing go away. Reports suggest the settlement was more than £3.7 million of tax — the same figure I identified back in July — then interest and 30 per cent penalties. That level of penalties is consistent with him having “failed to take reasonable care” — an astonishing way for an experienced businessman and senior politician to behave after receiving, by my reckoning, £27 million.
Four key considerations remain.
Zahawi said nothing unusual went on with YouGov and no tax was avoided. That seems impossible to reconcile with the terms of the settlement being reported.
He maintained for months that all his taxes are properly declared and paid in the UK. He told Newsnight on Wednesday that his taxes “were and are fully up to date”. But nobody pays millions in tax to settle a dispute with HMRC when their taxes are “properly declared and paid”.
The timings make it possible Zahawi may have started negotiating a settlement with HMRC while he was chancellor, from July 5 to September 6 last year. If that were the case, it’s harder to imagine a worse conflict of interest.
And — most important of all — public confidence in the tax system is shredded if people have the perception that there’s one rule for ministers and another for the rest of us. Ministers shouldn’t avoid tax. They shouldn’t dodge questions about their tax affairs — and the certainly shouldn’t set lawyers on the people raising the questions.
So no more dodging questions, please, Nadhim. No more libel threats. Time to apologise
