Rishi Sunak has sacked Nadhim Zahawi for serious breaches of the ministerial code after an investigation found he failed to be honest and open about his tax affairs.
Sir Laurie Magnus, the independent adviser on ministers’ interests, said that Zahawi had repeatedly failed to disclose details about an HMRC investigation into his tax affairs. Zahawi ended up reaching a £5 million settlement with HMRC, which included a penalty for tax avoidance.
In a letter to Zahawi, Sunak said: “Following the completion of the independent adviser’s investigation it is clear that there has been a very serious breach of the ministerial code. I have informed you of my decision to remove you from your position in His Majesty’s government.”
In a letter to the prime minister, Zahawi did not explicitly mention the findings of the ethics inquiry into his tax affairs, but told Sunak he was concerned “about the conduct from some of the fourth estate in recent weeks”, in a reference to the media.
He said: “It has been, after being blessed with my loving family, the privilege of my life to serve in successive governments and make what I believe to have been a tangible difference to the country I love.”
In comments that appear to indicate that the former chancellor holds out little prospect of returning to office in the years to come, he said: “You can be assured of my support from the back benches in the coming years. Your five priorities are the right priorities, and I will do whatever I can to help you deliver them.”
Zahawi was first questioned about his tax affairs in April 2021 but did not treat it as a “serious” matter. “I consider that an individual subject to the HMRC process faced by Mr Zahawi should have understood at the outset that they were under investigation by HMRC and this was a serious matter,” Magnus said.
Zahawi did not disclose the investigation on his appointment as education secretary on September 15, 2021, or his appointment as chancellor by Boris Johnson on July 5. He updated his declaration of interests only on July 15 after receiving a letter from HMRC.
“Given the nature of the investigation by HMRC, which started prior to his appointment as secretary of state for education on 15 September 2021, 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 that might be thought to give rise to conflict.”
Zahawi reached an “in-principle” agreement with HMRC in August 2022, before formally settling in September 2022. Magnus said that Zahawi should have further updated his declaration of interests after paying a penalty for tax avoidance but did not do so. It was updated only after details of the payment were disclosed by The Guardian this month.
Magnus also highlighted a public statement by Zahawi in July 2022, during the Tory leadership contest, in which he dismissed reports about his tax affairs as “inaccurate, unfair and clearly smears”. He said that he was unaware that HMRC was looking into his affairs.
Zahawi claimed at the time that he was unaware that he was under investigation, but Magnus said he should have understood that he was facing an HMRC probe. The failure to correct his “untrue public statement” until January 2023 was “inconsistent with the requirement for openness”.
Magnus concludes: “I consider that Mr Zahawi, in holding the high privilege of being a minister of the crown, has shown insufficient regard for the general principles of the ministerial code and the requirements … to be honest, open and an exemplary leader with his behaviour.
“Mr Zahawi’s conduct as a minister has fallen below the high standards that, as prime minister, you rightly expect from those who serve in your government.”