Conservative chairman Nadhim Zahawi has not made an “innocent error” in his tax affairs, the head of HM Revenue and Customs (HMRC) has suggested.
Mr Zahawi faces an ethics probe into whether he broke the ministerial code over his £5m tax settlement, after The Independent first revealed he had been subject to a HMRC investigation.
The Tory chairman paid a penalty to settle a £5m tax dispute – claiming that HMRC had judged his error to have been “careless and not deliberate”.
James Harra, the chief executive, told a cross-party group MPs on Thursday that “there are no penalties for innocent errors in your tax affairs”.
“If you take reasonable care but nevertheless make a mistake, whilst you will be liable for the tax and for interest if paid late, you would not be liable for a penalty,” he told the public accounts select committee.
“But if your error was as a result of carelessness then legislation says a penalty can apply in those circumstances,” the HMRC chief added.
Mr Harra made clear that he was not discussing Mr Zahawi’s case in particular, but was grilled by MPs about the nature of tax disputes and how top politicians are treated by HMRC.
He said HMRC officials would help “in any way” with the ethics inquiry into Mr Zahawi’s tax affairs. “If we are asked by the independent adviser on ministerial interests to help with the inquiry, we will do so in any way we possibly can.”
Mr Harra was asked what the organisation would do if a prominent politician make a claim about their tax affairs that HMRC knows is “categorically false”.
Committee chairwoman Dame Meg Hillier, a Labour MP, asked Mr Harra whether HMRC would ever correct that. He said such a position could be a matter of “frustration”, but that HMRC had a duty of confidentiality.
“As a general rule, our duty of confidentiality would mean that if a taxpayer made a public statement about their affairs which we felt we did not agree with, that would not be a matter that we would correct …But again, we would look at things on a case-by-case basis.”
Rishi Sunak – who has ordered has ethics adviser to investigate Mr Zahawi’s tax settlement – is said to be “livid” with his cabinet minister over the saga.
“Rishi is trying to do the right thing in terms of process but he’s livid,” an ally of Mr Sunak The Times. “He wants to get on with things but this is just a gift to Labour. He [the prime minister] has acted in good faith.
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