The UK tax authority has admitted that it gave misleading information last summer when it said no government minister was being investigated, even though Nadhim Zahawi was the subject of a probe.
HM Revenue & Customs has now apologised for wrongly stating last June that no ministers were under investigation — mistakes it blames on a botched response to a freedom of information request.
Zahawi paid £5mn to HMRC, including a £1mn penalty, to reach a settlement with the UK tax authority while he was chancellor last summer. However, the details have only come out gradually after misleading statements and legal threats by him.
Zahawi, the Conservative party chair, is fighting for his political life after Prime Minister Rishi Sunak referred the issue of his tax affairs to ethics adviser Sir Laurie Magnus. Sunak, who promised that his government would be one of “integrity, professionalism and accountability” is lagging 20 points behind the opposition Labour party, which sees the saga as an open goal.
On Friday, people inside HMRC said major blunders had led to its releasing incorrect information.
In response to a Financial Times inquiry last year, the department said no minister was being investigated, but Zahawi, then education secretary, was subject of a tax probe at the time. HMRC now admits that it failed to properly look into the issue.
Officials say the department blundered by searching only the part of HMRC that deals with self-assessment disputes, rather than a broader compliance division search, which would include the Fraud Investigation Service and Counter-Avoidance.
Maurice Frankel, director of the Campaign for Freedom of Information, said there was “no excuse” for the HMRC’s failure to do a proper search.
“It looks like they were trying to answer it in a way that doesn’t reveal anything significant — I don’t think they are entitled to do that,” he said.
People at HMRC say the department had also made a previous mistake in a response to a freedom of information request by Dan Neidle, founder of Tax Policy Associates.
“We acknowledge that the processing of this FOI request was subject to a series of administrative errors, which we very much regret,” HMRC said on Friday. “We corrected these errors as soon as they came to light.”
Neidle has now used another FOI request to obtain 200 pages of internal departmental emails from May and June last year that discuss his request for information and the FT’s own inquiry.
The heavily redacted cache includes multiple emails between officials. Nicole Newbury, director of wealth and midsized business compliance at HMRC, told colleagues it was important for the FOI response to be “deliberately drafted to be non-disclosive”.
Officials agreed to downplay the implications of inquiries, and to tell journalists that investigations “are frequently fairly simple clarification requests” and “can be quite routine”.
Angela Rayner, Labour’s deputy leader, said the disclosures were “not acceptable” and would not inspire public confidence. “At a time when the public desperately needs reassurance from the government and transparency over tax matters, it is deeply troubling that FOI requests have been subject to apparent obfuscation and concealment.”
The initial information provided to Neidle was incorrect — HMRC officials thought — because they told him on June 15 that a minister was under investigation, when in fact the person they were referring to was a backbench Tory MP.
By June 23, when the department told the FT that no ministers were being investigated, the probe into Zahawi had started.