HMRC admits mistakes in answering Zahawi questions as row continues

HM Revenue and Customs has come under scrutiny for providing misleading information last year after it said that no Government minister was under investigation, as the row over Nadhim Zahawi’s tax affairs continues.

It follows a difficult week for Downing Street as calls continue for the Conservative Party chairman to stand aside while under investigation for settling a multimillion-pound tax dispute while chancellor.

Mr Zahawi has authorised HMRC to discuss his settlement – estimated to be worth £4.8 million and include a penalty – with the ethics investigation ordered by Prime Minister Rishi Sunak.

Pressure on ministers grew after HMRC boss Jim Harra told MPs there are “no penalties for innocent errors in your tax affairs”.

On Saturday, HMRC admitted that it had made mistakes in the handling of a freedom of information request centred on the tax affairs of ministers.

It comes after the Financial Times reported that in response to an inquiry by the paper last year, HMRC said that no minister was being investigated.

But at the time, Mr Zahawi was the subject of a probe by tax officials.

The paper reported that a response to a freedom of information (FOI) request by tax lawyer Dan Neidle, who had been working to expose Mr Zahawi’s tax affairs, was believed by HMRC staff to be incorrect after he was informed that it was a backbench Tory MP and not a minister who was under investigation.

“We acknowledge that the processing of this FOI request was subject to a series of administrative errors, which we very much regret.

“We corrected these errors as soon as they came to light and are confident that our most recent response to Mr Neidle was both accurate and in line with the Information Commissioner’s Office guidance,” a HMRC spokesperson said.

A Liberal Democrats source said that the party is planning a “Shakespearean tragedy” in Mr Zahawi’s Stratford-on-Avon seat, with the constituency added to leader Sir Ed Davey’s tour of England ahead of the local elections in May.

Both the Lib Dems and Labour have called on Mr Zahawi to stand aside, but those calls have been so far resisted by both the Tory chairman and the Prime Minister.

Speaking during a Cabinet away day at Chequers on Thursday, Mr Sunak told broadcasters: “I’m not going to pre-judge the outcome of the investigation, it’s important that the independent adviser is able to do his work.

“That’s what he’s currently doing, that’s what I’ve asked him to do and I’ll await the findings of that investigation.”

A week ago, Mr Sunak told Prime Minister’s Questions that Mr Zahawi had addressed the fiasco “in full”.

But he went on to launch an investigation by Sir Laurie Magnus, his independent adviser on ministers’ interests, admitting there were “questions that need answering” after the penalty was revealed.

Mr Sunak insisted that “no issues were raised with me” when he appointed Mr Zahawi to his current role, amid questions over his political judgment.