From an Iraqi-refugee who spoke no English to a multi-millionaire businessman and cabinet minister, Nadhim Zahawi’s story is one of the most compelling in Westminster.

But questions about his financial affairs are now front and centre, having first gained prominence during the Stratford-on-Avon MP’s short-lived campaign to become prime minister last summer.

The allegations centre on his links to a Gibraltar-based trust ‘Balshore Investments Limited’, of which his father Hareth Zahawi is a director.

When Nadhim Zahawi co-founded the polling firm YouGov in May 2000, the trust was allocated shares in the company equalling the number given to the other co-founder Stephan Shakespeare.

Asked about this by Kay Burley last year, the then chancellor said neither he nor his wife benefit from the Gibraltar trust and denied it was used to avoid tax, saying it was simply because his father “lived abroad”.

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Speaking in July, 2022, the then Tory leadership contender told Kay Burley he was ‘clearly being smeared’ over tax claims

The cabinet minister has also suggested the trust held the shares because his father was involved in setting up the company, had put money into it and had provided guidance.

Those working at YouGov at the time said Hareth Zahawi was helpful, albeit in an informal way, while others at the firm said he was not involved beyond being a shareholder.

More on Nadhim Zahawi

Evidence from 2005 also appears to show – at that point, before he became an MP – Nadhim Zahawi was benefitting from this offshore trust.

A financial document published by YouGov sets out that a dividend payment that was due to go to Balshore instead was used to pay off loans owed by Mr Zahawi.

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Labour calls for Zahawi to be sacked

Potential tax saving uncovered

Much of this detail was first uncovered by Dan Neidle – a lawyer who used to work for a top corporate and now runs a not-for-profit focussed on tax policy.

Tory sources have briefed that Mr Neidle – who is a Labour member – is a “Labour activist” and the allegations are merely taken from his “blog”.

This comes after lawyers acting for Mr Zahawi sent Mr Neidle a series of letters last year threatening legal action if he continued to publish analysis of the Tory MP’s financial affairs.

After digging through pages of documents, Mr Neidle had suggested there would have been a potential tax saving of several million pounds when Balshore sold its YouGov shares.

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Zahawi asked if he settled with HMRC

That’s because they were held in an offshore trust rather than by Mr Zahawi directly, and hence not eligible for capital gains tax.

It’s this figure that is at the centre of the repayment to HMRC.

On Friday, the Guardian newspaper suggested Mr Zahawi reached a settlement with the exchequer that reflected the fact he should have paid tax on the sale of these shares at the time.

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Nadhim Zahawi’s statement in full

“As a senior politician I know that scrutiny and propriety are important parts of public life. Twenty-two years ago I co-founded a company called YouGov. I’m incredibly proud of what we achieved. It is an amazing business that has employed thousands of people and provides a world-beating service.

“When we set it up, I didn’t have the money or the expertise to go it alone. So I asked my father to help. In the process, he took founder shares in the business in exchange for some capital and his invaluable guidance. 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.

“Additionally, HMRC agreed with my accountants that I have never set up an offshore structure, including Balshore Investments, and that I am not the beneficiary of Balshore Investments. This matter was resolved prior to my appointments as chancellor of the duchy of Lancaster and subsequently chairman of the party I love so much. When I was appointed by the prime minister, all my tax affairs were up to date.”

Tax affairs up to date

Mr Zahawi has now confirmed that tax was repaid saying that HMRC had concluded his father was not entitled to the share allocation handed to him when YouGov was created.

The Tory chairman said this was a “careless and not a deliberate error” and didn’t confirm if any penalty was also levied.

He also re-stated that he was not a beneficiary of Balshore Investments and had never set up an offshore structure.

However, this intervention clashes somewhat with previous assertions that his tax affairs “were and are fully up to date”.

Read more: Nadhim Zahawi says HMRC concluded tax error was ‘careless and not deliberate’

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It also looks somewhat awkward given his attempts to silence those looking into his tax affairs and his statement to Sky News last year that people were trying to “smear” him over his business dealings.

There are also still unanswered questions, including the pointed one of whether someone who was chancellor a matter of months ago was issued with a penalty by HMRC for failing to pay the right amount of tax.

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