Nadim Zahawi is under scrutiny over a multi-million pound tax dispute.

The Conservative chairman says he made a “careless and not deliberate” error according to HM Revenue & Customs (HMRC), but he is now facing calls to resign.

So, what are the tax allegations facing Nadim Zahawi and what have he and Prime Minister Rishi Sunak said?

Here’s what we know so far.

The background

The row centres on a tax bill related to the sale of shares in YouGov, the polling firm Mr Zahawi co-founded, and whether the former chancellor tried to avoid paying tax by using an offshore company to hold shares in the company.

The shares were held by Balshore Investments, a company registered in Gibraltar and linked to Mr Zahawi’s family.

When were the tax claims first mentioned?

Mr Zahawi’s tax affairs first began to make headlines last summer when he ran in the first of that year’s Tory leadership contests.

On 6 July 2022 – the day after Mr Zahawi was made chancellor by the then-Prime Minister Boris Johnson – The Independent reported that Mr Zahawi had been the subject of an investigation by the National Crime Agency and HMRC.

But Mr Zahawi told the paper he had no knowledge of this and that he had “paid all taxes”.

In a statement on 10 July, he said news stories suggesting he had been investigated by agencies, including HMRC, were “inaccurate, unfair and […] clearly smears”.

On 13 July, he was eliminated from the contest – which Liz Truss went on to win – but on 25 October he was appointed Conservative party chairman after Mr Sunak replaced Ms Truss as Prime Minister.

Why are Zahawi allegations in the news now?

Fast forward six months, the Sun on Sunday reported on 14 January 2023 that Mr Zahawi’s representatives would pay a “seven-figure sum” to settle a dispute with HMRC.

But a spokesperson for Mr Zahawi said on 20 January that his tax affairs “were and are fully up to date and paid in the UK,” and that “neither he nor his direct family are beneficiaries of Balshore Investments or any trust associated with it”.

Mr Zahawi then issued a statement the following day which said that he co-founded YouGov 22 years ago, but that he “didn’t have the money or the expertise to go it alone” so he asked his father for guidance.

He said his father took founder shares in YouGov, but that last year HMRC “disagreed about the exact allocation”, leading him to “settle the matter and pay what they said was due”.

“They concluded that this was a ‘careless and not deliberate’ error,” he added. The HMRC compliance handbook says ‘careless’ means a failure to take reasonable care in relation to your tax affairs.

A ‘deliberate but not concealed’ inaccuracy is when someone gives HMRC a document that they know contains an inaccuracy, and ‘deliberate and concealed’ means a document contains a deliberate inaccuracy and steps have been taken to hide it.

Mr Zahawi also noted that HMRC agreed that he has never set up an offshore structure, nor  is he the beneficiary of Balshore Investments, and that the matter was “resolved” prior to his appointments as chancellor and chairman of the party.

The estimated tax bill settlement with HMRC was reported by the Guardian to be £3.7m, with a 30% penalty and interest charges on top of this bringing the total sum to more than £5m.

But Mr Zahawi has not confirmed the value of the settlement with HMRC or of any penalties paid.

Two days after Mr Zahawi’s statement, the Prime Minister announced that he had asked his independent ethics adviser to look into the minister’s tax affairs as there are “questions that need answering”.

But Mr Zahawi said he is “confident I acted properly throughout” and that he looked forward to “explaining the facts of this issue” to the adviser, Sir Laurie Magnus.

In recent days, the Independent has reported that Mr Zahawi tried to stop the paper exposing that he was being investigated over his tax affairs by threatening legal action.

David Gauke, former chief secretary to the Treasury, told Radio 4 on 25 January that it appears Mr Zahawi was “threatening to sue people for libel for essentially telling the truth”, which is “a concern”.

During PMQs on 25 January, Mr Sunak said the issues in question regarding Mr Zahawi’s tax “occurred before I was Prime Minister” and that “no issues were raised with me when he was appointed to his current role”.

He noted that since he commented on this issue last week “more information has come forward which is why I’ve asked an independent adviser to look into the matter”.

No 10 has been contacted for comment.