Foreign Secretary James Cleverly defends 'successful entrepreneur' Nadhim Zahawi amid tax bill row

22 January 2023, 12:51 | Updated: 22 January 2023, 16:10

Foreign Secretary James Cleverly has defended the Conservative party chairman Nadhim Zahawi, who is embroiled in a bitter row over his taxes, calling him a 'successful entrepreneur'.

Mr Zahawi has faced calls to quit after he admitted paying a settlement to HMRC after a tax error related to a shareholding in the company he founded, YouGov.

The former chancellor said the mistake was "careless" rather than deliberate, although critics claimed he had avoided tax.

Mr Cleverly told LBC's Andrew Castle on Sunday: "The fact is that Nadhim had a tax bill because he was a successful entrepreneur who built a business from nothing and employed people.

"The business paid tax, he paid tax, the people he employed paid taxes, that’s why we’re having this conversation.

"Now look, he said in the statement that he put out that he made mistakes… that he’d been careless, but that he’d brought his tax affairs up to date."

But critics said on Sunday Mr Zahawi's political survival is "difficult" after he admitted paying a settlement to HM Revenue & Customs following a tax error related to a shareholding in YouGov.

The beleaguered Tory chairman released a statement on Saturday to "address some of the confusion about my finances", but it raised further questions, including whether Mr Zahawi negotiated the dispute while he was serving as chancellor.

He did not disclose the size of the settlement - reported to be an estimated £4.8 million including a 30% penalty - or confirm whether he paid a fine.

Founder of Tax Policy Associates Dan Neidle says Nadhim Zahawi 'should resign'

Mr Cleverly denied any knowledge of the details when pressed during other media appearances on Sunday. "I don't know more than is in his statement," he said.

Asked whether Mr Zahawi should reveal this information, the Foreign Secretary said: "People's taxes are private matters. I know that as politicians we, quite rightly, are expected to have a higher level of disclosure than perhaps other people might do.

"Nadhim has issued a statement where he has admitted that he made a careless error, that this is now resolved."

Mr Cleverly also evaded questions on what Rishi Sunak knew when he appointed Mr Zahawi as party chairman.

He suggested the Prime Minister does not discuss ministers' "external affairs" during appointments and that it is the Cabinet Office's role to conduct due diligence on his behalf.

He said he was unable to answer questions on Mr Zahawi's tax affairs because he was carrying out his duties as Foreign Secretary during the week and then "having a bit of a rest and doing some shopping".

Asked whether Mr Zahawi will survive in his role until Prime Minister's Questions on Wednesday, Mr Cleverly said: "What else am I going to say other than yes, because he's a very, very effective minister."

But Labour's shadow chief secretary to the Treasury cast doubt on this. Pat McFadden said: "It's difficult for Mr Zahawi because the problem with this is what we're being asked to believe.

"We're being asked to believe that he had this asset worth £27 million that he didn't really know was his, and therefore didn't really know tax was due on it.

"He was using pretty heavy legal letters to get people to keep quiet about this... threatening legal action, and then we're asked to believe that it's all just carelessness. That doesn't quite fit."

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Mr McFadden also said the matter is a "test" of Mr Sunak's promise to turn a new leaf after Boris Johnson's scandal-plagued premiership, suggesting his pledge would be undermined "if this is just shrugged off".

Reports about Mr Zahawi's tax affairs began emerging when he was appointed chancellor by Mr Johnson last summer. He denied allegations that he avoided tax by using an offshore company registered in Gibraltar to hold shares in the YouGov polling company he co-founded.

Opposition parties have demanded an independent investigation as well as the publication of all of Mr Zahawi's correspondence with HMRC.