Thread by @DanNeidle

I gave an interview to BBC Breakfast this morning on Zahawi's statement/partial admission. That, and my detailed response, can be found here: taxpolicy.org.uk/2023/01/22/zah…

Here's my commentary on the statement:

I agree. YouGov, and Zahawi’s role in founding it, is an amazing British success story. He should be proud of it.

The “some capital” is a lie. It’s backing down from his initial claim that “startup capital” was provided – it’s now merely “some”. But it’s still not true. The facts are that his father/Balshore provided no capital at the time, and paid a nominal £7,000 two years later.

When I first called this a lie, Zahawi’s lawyers threatened to sue me for libel. When I pointed out the backdated form, they went silent, and never responded on the point. I don’t understand why Zahawi continues to raise a point that even his lawyers backed away from.

This was Zahawi’s fallback explanation, after I disproved the “capital”. The problem is that it contradicts all the published history of YouGov, everyone The Times talked to, and was denied by YouGov itself (in an official statement given to The Times).

Biiiig timeline jump here. It misses the small detail of me saying I thought he’d failed to pay £3.7m in tax, him sending lawyers to threaten me and half of Fleet Street with libel writs, and him issuing denials that anything was wrong.

When exactly did he realise that I was right, his denials were wrong, and approach HMRC?

It also misses the timeline of when the “taxable event” happened – the thing that resulted in him having the large tax bill...

This was either all or almost-entirely-all much more recent than twenty-one years ago. The big gain on the YouGov shares was in 2017/18. This is not ancient history – it’s when Zahawi was a successful and wealthy man, who you would expect to have very competent tax advisers.

Unclear quite what that means – it goes to the technical basis for taxing him. Obviously, his father was “entitled” to the shares, because he owned them, as a result of Zahawi’s generous decision in 2000 to arrange for YouGov to issue them to Balshore for free.

Perhaps this is suggesting the arrangement was a settlement, with Zahawi a beneficiary as to x% and his father to y%? But that’s a point of technical detail which goes down a long rabbit hole, and I won’t go further into here.

If it was deliberate, he’d be prosecuted for criminal tax evasion. HMRC “concluding” it wasn’t criminal isn’t a ringing endorsement.

This implies it was some obscure technical point, which could have gone either way, and he chose to pay up. That isn’t what happened. 30% penalties don’t get charged for being on the wrong side of obscure technical points. He was “careless”.

What does that mean? Well, it’s easy to not be “careless”: instruct proper advisers, give them all the information relevant to your tax return, follow their advice, and check your tax return (as best as you reasonably can)...

Do these things and, even if your advisers turn out to have been total clowns, the law and HMRC will agree that you weren’t careless.

So we now know for a fact Zahawi didn’t do these things.

We can’t know for sure what went wrong but, under the circumstances, my view (and that of most other experts I’ve spoken to) is that the most likely scenario is that he received somewhere around £27m, didn’t obtain proper advice, and didn’t declare it to HMRC.

That settlement almost certainly contained a written admission by Zahawi of default – that he had failed to meet his obligations - because HMRC practice requires that. People settling technical disputes (like my old clients) don't say this. gov.uk/hmrc-internal-…

Games with words. We know his father set it up.

We know Zahawi likes these games. When The Sun reported the story, he said he didn't have "lawyers" negotiating the settlement with HMRC. He now admits there was a negotiated settlement, but it was actually "accountants".

But not just accountants - the law requires that lawyers are involved.

I regard these kind of games as an attempt to deceive - as a lie - and I expect most people in and outside politics will have a similar view.

More games. Balshore Investments is a company. Nobody is a beneficiary of Balshore Investments.

The question is: is he a beneficiary of the trust?

He has denied this in the past. His lawyers denied it to me as recently as 1 December 2022. There’s clear evidence it’s not true, and that he received a gift from Balshore on one occasion.

Perhaps these are more word games.

If true, this means he negotiated and signed a settlement with HMRC when he was Chancellor of the Exchequer. The phrase “conflict of interest” seems insufficient.

When Winston Churchill was Chancellor, he famously summoned the Chairman of the Board of the Inland Revenue, and had him devise a tax avoidance scheme to convert his income into capital, so it escaped tax (there was no CGT at the time).

Times have changed. And Zahawi, whilst an impressive figure in many ways, is not Churchill.

Key outstanding questions

1. When did Zahawi become aware he had unpaid tax, and how? Was it sparked by my July report? taxpolicy.org.uk/2022/07/10/zah…

2. Why did he respond to me, and others reporting on his tax affairs, with libel threats rather than simply saying there were questions he was looking into? taxpolicy.org.uk/2022/07/22/let…

3. What were the income/gains on which he is taxed? My expectation is that this is around £27m originating in Balshore’s gain on the YouGov shares, returned in some form – directly or indirectly – to Zahawi.

4. If that’s right, why did he repeatedly deny benefitting from Balshore and the trust?

5. Why didn’t he declare the £27m (or whatever the precise figure was) to HMRC?

6. When did he/his advisers approach HMRC for a settlement?

7. If it was at a time when he was Chancellor, how was the obvious conflict of interest declared and handled?

8. Was the settlement under COP 9 – the procedure where HMRC suspects tax fraud? This can end in a contractual settlement of precisely the kind Zahawi entered into, i.e. if HMRC conclude they suspect but can't prove fraud. gov.uk/government/pub…

9. In the experience of advisers who work on this stuff day in, day out, a 30% penalty implies Zahawi and his advisers did not provide full and complete cooperation. Why was that?

10. Settlements usually contain a written admission by the taxpayer that they had failed to meet their legal obligations – i.e. that their taxes were, prior to the settlement, in default. Did his? gov.uk/hmrc-internal-…

11. If it did, then why has he repeatedly said that he has always reported, and paid, the tax that is due?

12. When was the settlement finalised?

13. Why did he attempt to mislead The Sun, by saying he didn't have "lawyers" negotiating the settlement?

(This isn't legal advice, but I would strongly advise against trying to mislead @TheSun and @AArmstrong_says )

Full write up, and terrible quality video, here: taxpolicy.org.uk/2023/01/22/zah…

Full backstory here: taxpolicy.org.uk/zahawi_story/

Much better written version in The Sunday Times, because they have editors and subs and I don't. thetimes.co.uk/article/when-i…

And if you have a high tolerance for tax nerdery, most of which is much less interesting than Mr Zahawi (but more important), you can subscribe here: taxpolicy.org.uk/subscribe

I don't take donations, but TaxAid does: taxaid.org.uk . They do an amazing job and need our support.

My wife has corrected my rubbish lawyer math. If Zahawi is worth £100m now, and received £27m sometime around 2017/18, then that amounted to a third of his wealth, not a quarter.

And one of the KCs who has been providing invaluable technical expertise corrects one point I make. It's not correct that Zahawi had to have a lawyer draft the settlement. It could have been a contract, not a deed. My mistake. The website version is corrected.