a statue of Lady Justice reading a newspaper

Three wrong takes on the Zahawi affair

I wanted to try and scotch what I think are three wrong takes on the whole Zahawi business. So a quick few words:

This was David vs Goliath, and David won!

No – Zahawi and his advisers made the tactical mistake of accidentally SLAPPing someone with plenty of financial resources, time, litigation experience, and plenty of contacts and friends in the legal, tax and media worlds. I’m sure Zahawi spent a small fortune on advisers – but my team would probably have cost ten times as much (had they charged me). Goliath accidentally started a fight with a bigger Goliath.

That hides the unpleasant truth that the basic SLAPP strategy remains sound. In reality, when Goliath picks on David, Goliath will almost always win. That’s how our libel laws work, and it’s a disgrace.

The lamestream media missed this story because they were useless/corrupt!

I only started looking at ministers because of the weird FOIA experience Jim Pickard (FT) and I had. in June/July 2022. I only started looking at Zahawi because of the astonishing Anna Issac (Independent) report that Zahawi’s finances had been investigated by the NCA and HMRC and the Michael Savage and Jon Ungoed-Thomas story (Guardian) soon after that a “red flag” had been raised by the Cabinet Office over Zahawi’s appointment.

Zahawi’s initial explanations were disproved thanks to investigative work from Billy Kenber and George Greenwood (Times).

Zahawi’s attempt to sue me was then covered in The Times and briefly became widely shared on social media.

But it then became a very hard story to cover. I continued to dig, sending correspondence to Zahawi’s lawyers and ultimately referring them to the Solicitors Regulatory Authority. It was complicated, relied upon believing my rather technical claims, and was in the teeth of firm denials from Zahawi and legal threats from his lawyers.

There was also something of an overdose of political news at the time. So it had little attention in the press or, for that matter, in social media.

But still, some papers covered it, particularly the specialist legal press. Catrin Griffiths at The Lawyer was fearless. And Laith Al-Khalaf and Sabah Meddings wrote, and the Sunday Times devoted space, to a lengthy profile of me, focussing on Zahawi. The Economist had a very kind piece. Much harder for the broadcast media, given the “due impartiality” rules and the additional scrutiny they are under.

Probably Zahawi’s combination of litigation and stonewalling would have made the story die a slow, quiet death, but then Ashley Armstrong at The Sun blew the doors off with the scoop that, at the same time Zahawi was sending lawyer letters and denying everything, he was actually negotiating a secret settlement with HMRC. Followed a week later by Anna Issac (again! but now at the Guardian) with another scoop: Zahawi had paid 30% penalties.

After that, everyone was on the story – newspapers, broadcast media, BBC, ITV, Sky News etc. Acres of coverage, and large numbers of journalists delving further into Zahawi’s background.

So without the work of newspaper journalists, I wouldn’t have started looking at Zahawi, wouldn’t have been able to conclude that Zahawi was not telling the truth, wouldn’t have even suspected that a settlement had been made (with penalties!) and certainly the whole thing wouldn’t have reached a mass audience.

This isn’t a story of media failure – it’s a story of effective scrutiny from all corners of the media, in the teeth of denials and legal threats.

HMRC lied to Neidle and Pickard when they said no Minister was under enquiry

The timeline is still very unclear, but it appears that Zahawi was under investigation for more than a year prior to his appointment as Chancellor. However, it does not seem he was under enquiry – an enquiry being a formal status that lets HMRC freeze limitation periods and require delivery of documents. Very possibly HMRC had made a discovery assessment. Either way, it seems likely that HMRC’s response to me was accurate. I didn’t ask if a Minister was under “investigation” because there is no formal legal concept of an “investigation” and HMRC would, rightly, have said that it was therefore too imprecise a question for them to answer.

Comment policy

This website has benefited from some amazingly insightful comments, some of which have materially advanced our work. Comments are open, but we are really looking for comments which advance the debate – e.g. by specific criticisms, additions, or comments on the article (particularly technical tax comments, or comments from people with practical experience in the area). I love reading emails thanking us for our work, but I will delete those when they’re comments – just so people can clearly see the more technical comments. I will also delete comments which are political in nature

Photo by Stable Diffusion 2.1: “a photo of a statue of lady justice, carrying a newspaper”

8 thoughts on “Three wrong takes on the Zahawi affair”

  1. Bill Stevenson 10 February 2023

    It is quite possible that NZ just settled the HMRC debt as the settlor of a trust he created for his family to benefit from. It is equally possible that he received advice as to creating the settlement trust n that as an MP he would be deemed U.K. domiciled but his family might not have been so U.K. domiciled. Then there could have been interesting exchanges of correspondence between HMRC and his advisers on RTC disclosure consideration of post 2015-16 offshore transactions giving rise to a low careless penalty of 30% ( and careless because he relied on his tax advisers). Of course this is all speculation on my part from experience of enquiries but could easily explain why the taxpayer might not have seen it as an investigation. It. Would also be possible for HMRC to correctly say that a taxpayer was not under investigation if for example the advisers had approached HMRC with a view to clarifying matters and making a disclosure before HMRC formally took up the cudgels outside a tax return enquiry window and without issuing Sch 36 notices.
    Equally I have to stress that this is related without the benefit of any insider knowledge or breach of confidentiality on anyones part

  2. IamSpartacus 30 January 2023

    Seeing that the penalty range for Careless at HMRC is 0% to 30%, and Zahawi is supposed to have got a Careless 30% penalty, doesn’t this mean he either didn’t help HMRC to arrive at their findings at all (as no reductions given for ‘Helping, Telling, Giving’), or was this a bespoke deal given by HMRC so as to avoid Zahawi receiving a Deliberate penalty?

    • It may be that the Gibraltar “category 2” offshore rate of 45% applied. If so, there was some reduction for cooperation – but, it seems, not a large one.

  3. Rebecca Benneyworth 30 January 2023

    If we are correct with the timeline and the flow of funds triggered an NCA investigation which was subsequently handed off to HMRC then no formal enquiry could have been opened into the relevant tax return unless it had been filed late (as suggested by Geoff) so indeed the questions were directed to a discovery assessment. I do think (if we were to believe Mr Zahawi) there could be questions to answer from his tax advisers as to why he thought he was “just answering questions” rather than this being a more serious matter. Surely once they knew the substance of the transactions HMRC was looking into they should have warned him that this was a serious matter requiring his full attention? Or was he less than co-operative with them? Or did they tell him clearly but he didn’t take it seriously? Or has he just plain lied and is still doing so in claiming that he didn’t know. I guess we will never know. But I suspect the advisers concerned will be having a full ‘post mortem’ on precisely what was said and when.

  4. The lack of a formal enquiry was probably because by the time the information that cast doubt on the return was obtained the time limit for opening a formal enquiry into the relevant return had passed. Standard practice then is to ask questions with a view to making a discovery assessment if necessary and use the information powers at Sch 36 FA08 rather than the specific SA enquiry powers. Not uncommon at all for HMRC to do this in such circumstances.

  5. Richard Sage 29 January 2023

    The journalists were indeed a crucial part of this.
    But the vast majority of what they contributed was only possible because individuals (whether civil servants or private sector employees) breached their obligations of confidentiality.
    That is not a robust basis on which to keep wrong’uns out of power, or to get residents to pay their taxes.
    As they went to the press rather than reporting internally, I don’t think they are covered by existing whistleblowing protection legislation?
    How much more is going on, and will go on, that is not detected?

  6. Peter Stoddart 29 January 2023

    In turning over the stones of this story did you ever discover how NZ properly declared his “interests in the assets” giving rise to the chargeable gain on him personally? Has the Parliamentary Commissioner for Standards been working on this matter?

  7. alison sinderson 29 January 2023

    I thought that offshore trusts as a mechanism for holding assets where there was a capital gain ( and taxing only on uk remittance basis) , were effectvely “outlawed” by HMRC more than a decade ago.

    Was this really so brazen or more sophisticated?

Add a Comment

Your email address will not be published.

We use cookies to store and use information whilst you are visiting our website, and to help it work smoothly, but will never serve any advertising to you.  Our privacy policy is here