How I cost Nadhim Zahawi £3.7million

July 6 2022: I start examining publicly available documents on Zahawi’s businesses after the Independent reports he has been the subject of an investigation by the National Crime Agency, the Serious Fraud Office and HMRC – which Zahawi – and The Guardian writes that the Cabinet Office had raised a “red flag” about Zahawi’s tax affairs before his appointment as chancellor. This is pointedly not denied by the Cabinet Office.

July 7-9, 2022: I find proof that Balshore Investments Limited, a Gibraltar company previously linked to Zahawi, is held by a trust controlled by his parents. I conclude that, when Zahawi founded the polling company YouGov in 2000, he arranged for the founder shares that would have been his to go to Balshore. It paid nothing for the shares. The only plausible reason for this is tax avoidance. 

July 10, 2022: I calculated the tax I think Zahawi avoided – mostly the gain on the YouGov shares which would have been subject to capital gains tax had Zahawi held them, but is tax-free in Gibraltar. The figure is £3.7m.

July 11, 2022: Interviewed by Kay Burley on Sky News, Zahawi says: “There have been claims I benefit from an offshore trust. Again let me be clear, I do not benefit from an offshore trust. Nor does my wife. We don’t benefit at all from that.”

July 13-14, 2022: Zahawi’s people claim Balshore were given the shares because his father provided startup capital, but a re-read of the documents satisfies me that this is false. I say so with a post on the Tax Policy Associates website, and challenge Zahawi to correct me if I am wrong. His people respond with a new explanation: that Balshore got the YouGov shares because Zahawi “had no experience of running a business at the time and so relied heavily on the support and guidance of his father, who was an experienced entrepreneur”. I can find nothing to support this story.

July 16, 2022: The Times suggests the new explanation is false – YouGov itself, and people present at its founding, say Zahawi’s father wasn’t involved in the business. At 8.40am, I tweet that this means Zahawi’s first explanation, that his father provided startup capital, was a lie and deliberately false. By 7pm I receive an email from Osborne Clarke, Zahawi’s libel lawyer. It requires me to retract my allegation of lies by the end of the day, or they will write to me on an “open basis” (which usually means they will threaten to sue me). The email is a mess, accusing me of saying Zahawi’s second explanation was a lie, when in fact I said his first explanation was a lie. I do not react.

July 17, 2022: More analysis of documents relating to the sale of YouGov shares to the public reveals a £99,000 dividend from Balshore was redirected to Zahawi. His claim to not have benefited from the trust is false. The obvious inference is that there were many gifts; it’s just happenstance we see this one. A forensic accountant working with me identifies almost £30m of unsecured loans going into Zahawi’s property company. Another obvious inference: some of this may be the YouGov profits coming back to Zahawi.

19 July, 2022: I receive a letter from Osborne Clarke, which claims Balshore paid £7,000 for the shares in 2000. I’m reasonably confident it didn’t – two years later a back-dated Companies House form was filed and £7,000 paid. It further claims the £7,000 was “startup capital” – just daft. As with previous correspondence, I’m warned I can’t publish the letter, presumably under threat of legal action. The letter does not contain a statement that Zahawi’s taxes have been fully reported and paid to HMRC, so I publish my analysis from the 17th.

July 22, 2022: Other people are receiving threatening letters from Osborne Clarke, containing warnings not to publish. It’s outrageous that Zahawi thinks he can not only use libel law to shut people up, but do it in secret. After consulting confidentiality experts, I publish the Osborne Clarke letters. The Times reports it and the Tax Policy Associates website, which normally gets a few thousand readers a day, gets 400,000.

August 1, 2022: I have reached an impasse. I think I’ve proven that Zahawi has lied about the YouGov structure and thus avoided around £3.7m in tax. But there’s been little media interest. Why? Partly Zahawi firing out libel threats. But I think mostly that we’ve been overwhelmed by politics, and scandal, and this just didn’t break through. All I can do is keep plugging away.

August 24, 2022: I ask Zahawi, through his lawyers, why there are so many inconsistencies in his story. And specifically, why he told Kay Burley he doesn’t benefit from the trust, when we know he received £99,000 from it. They duck the question. But they tell me Zahawi’s taxes are “fully declared and paid in the UK”.

September 6, 2022: Zahawi steps down as chancellor but takes up three other briefs in Liz Truss’s government. We now know that, at about this time, his accountants probably approached HMRC to settle his unpaid YouGov taxes. Zahawi knew that his tax was not fully declared and paid, and that what I’d written in July was in substance correct.

September 13, 2022: More evasion from Osborne Clarke. But one clear statement: “Our client’s taxes are fully declared and paid in the UK”.

December 1-3, 2022: Osborne Clarke provide another evasive non-response, but state: “[Zahawi’s] taxes are properly declared and paid in the United Kingdom”. At this point it seems highly likely that Zahawi was deep into settlement discussions with HMRC, and therefore he knew that this statement was false). At this point, the story looks dead. His strategy of saying nothing seems to have won out.

January 15, 2023: A scoop from Ashley Armstrong in The Sun on Sunday changes everything. Zahawi paid millions in tax to settle a dispute. There’s a hilarious non-denial denial from Zahawi that he “never had to instruct any lawyers to deal with HMRC on his behalf”. The obvious conclusion is that Zahawi responded to my July analysis by instructing accountants to seek a “contractual settlement” with HMRC before an enquiry could be raised. These settlements are confidential. Zahawi was trying to make it all go away, quickly and quietly.

January 16, 2023: A statement from Zahawi says his taxes are “properly declared and paid in the UK”. This can only be true in the most hyper-literal sense: today, his taxes (maybe) are properly declared in the UK. When he approached HMRC for a settlement, they certainly weren’t.

January 18, 2023: At prime minister’s questions, Rishi Sunak says Zahawi has “addressed this matter in full”. I know people who worked with Sunak – they’ve no doubt as to his intelligence and his honesty. So it’s disappointing to hear this. Later, Zahawi tells Newsnight that his tax affairs “were and are fully up to date”. No more games with tenses. If/when the settlement details come out, we will know for sure this was a lie. And we’ll know that all the denials his lawyers issued to me were a lie – because at the very time they were made, Zahawi was negotiating a settlement to quietly cover up the fact he’d avoided millions in tax.

Dan Neidle spent almost 25 years as a tax lawyer, and was head of tax at the London office of one of the largest law firms in the world. His non-profit, financially independent Tax Policy Associates Ltd provides policymakers and politicians with expert and impartial tax policy advice and works to improve the public understanding of tax, by assisting journalists writing on and investigating tax policy, tax avoidance and tax evasion.