Tory party chairman Nadhim Zahawi has released a statement to “address some of the confusion about [his] finances” after reports claimed that he paid a penalty as part of a multimillion-pound tax settlement.

Deputy Prime Minister Dominic Raab defended his colleague, saying Mr Zahawi “has been very clear that he’s paid all the tax that he’s owed” and “if there’s further questions… I’m sure there’ll be the proper transparency”.

Nadhim Zahawi releases statement

In the statement, Zahawi said: “As a senior politician I know that scrutiny and propriety are important parts of public life. Twenty-two years ago I co-founded a company called YouGov. I’m incredibly proud of what we achieved. It is an amazing business that has employed thousands of people and provides a world-beating service.

“When we set it up, I didn’t have the money or the expertise to go it alone. So I asked my father to help. In the process, he took founder shares in the business in exchange for some capital and his invaluable guidance. Twenty one years later, when I was being appointed chancellor of the exchequer, questions were being raised about my tax affairs. I discussed this with the Cabinet Office at the time.

Times and Star: Tory party chairman Nadhim Zahawi has released a statement to “address some of the confusion about [his] finances”Tory party chairman Nadhim Zahawi has released a statement to “address some of the confusion about [his] finances” (Image: Victoria Jones)

“Following discussions with HMRC, they agreed that my father was entitled to founder shares in YouGov, though they disagreed about the exact allocation. They concluded that this was a ‘careless and not deliberate’ error.

“So that I could focus on my life as a public servant, I chose to settle the matter and pay what they said was due, which was the right thing to do.

“Additionally, HMRC agreed with my accountants that I have never set up an offshore structure, including Balshore Investments, and that I am not the beneficiary of Balshore Investments. This matter was resolved prior to my appointments as chancellor of the duchy of Lancaster and subsequently chairman of the party I love so much. When I was appointed by the Prime Minister, all my tax affairs were up to date.”

Mr Zahawi allegedly avoided tax by using an offshore company registered in Gibraltar to hold shares in the polling company he co-founded, YouGov.

YouGov’s 2009 annual report showed a more than 10% shareholding by Gibraltar-registered Balshore Investments.

The report described the company as the “family trust of Nadhim Zahawi”, then an executive director of the polling firm.

Tax lawyer Dan Neidle has estimated that Mr Zahawi owed £3.7 million, and said that with interest that could be due on top of the reported 30% penalty, the total could be more than £4.8 million.

Mr Neidle, of the Tax Policy Associates think tank, said: “You don’t pay a 30% penalty if your tax affairs are in order.

“You do it, at best, if you’ve been careless if you haven’t paid tax that’s due.”

The Government website says a penalty of up to 30% is due if it arises because of a lack of reasonable care. A deliberate error can incur a penalty of between 20% and 70%.

A spokesman for Mr Zahawi previously said his taxes were “properly declared and paid in the UK” and the minister had “never had to instruct any lawyers to deal with HMRC on his behalf”.