The Chancellor's Dodgy Tax Affairs
Well what a week it has been in British politics. A slew of ministers resigning, their replacements realising that the situation is untenable and a prime minister holed up in Downing Street where he doesn’t have to accept the fact that his time is up.
In the end though we avoided any sort of major constitutional crisis and the starting gun was fired for the leadership race to replace Boris Johnson as leader of the Conservative Party and as prime minister of the UK.
A candidate of interest to the legal world is Suella Braverman, the current Attorney General. While she was the first to announce her candidacy, she is quite some way behind in the polls; level with Priti Patel, who at the time of writing, has not even said whether she is even running or not!
I plan to write about our esteemed Attorney General later on this week in a post for subscribers but today I want to focus on another candidate.
Before last week, Nadhim Zahawi was a relatively minor figure in British politics. He succeeded Gavin Williamson as Education Secretary less than a year ago. Then, as Boris Johnson scrambled around to fill key positions in his depleted cabinet, Zahawi found himself next door to the prime minister as Chancellor of the Exchequer.
Within a day he had spent enough time in the job to find some Treasury-headed notepaper and wrote to his boss calling on him to resign. All of this catapulted him into the limelight but his promotion and the fact that he might be the next prime minister have resulted in renewed scrutiny of Zahawi’s personal tax affairs.
Many of you will have heard of the polling company YouGov but did you know that Zahawi was a co-founder with Stephan Shakespeare?
Probably not, but while Shakespeare took a 42.5% share in the company, another 42.5% went to Balshore Investments Ltd.1 What is this company and why did Zahawi not benefit from the founding of YouGov?
It turns out that Balshore is a company owned by the Zahawi family trust and it now appears that this company took the shares instead of Zahawi for the purposes of tax avoidance. The new Chancellor denies that he benefits from the trust but that just doesn’t seem to ring true.
We know from public records that a dividend that would have gone to Balshore in 2005 was instead used to pay off a loan that YouGov had made to Zahawi. Furthermore, when the shares were sold in 2017, if they had been owned by Zahawi personally he would have had to pay £3 million in capital gains tax. Instead the trust is likely to have paid no such tax whatsoever. The use of the trust also means that the assets will not be subject to inheritance tax.
A lot of this analysis comes from the brilliant Dan Neidle over at Tax Policy Associates and, as Dan points out, it is possible that there is an innocent explanation for all of this as well as other issues such as Zahawi’s non-dom status and a failure to enter information into the Register of Members’ Interests.
In reality though it seems that Zahawi is far from clean and it has been revealed that he is under investigation by HMRC. As his leadership prospects grow there are increased calls for him to answer some very tough questions.
The move from number 11 to number 10 Downing Street may prove a step too far for this chancellor.
In the podcast this week we covered a telecommunications case that arose because of some pretty shoddy drafting. What constitutes an ‘occupier’ was tending to vary based on the context and that was leading to some pretty absurd results.
Episode link: http://uklawweekly.com/2022-uksc-18/
Make a difference today,
Marcus
The remaining 15% went to another director, Bruce Copp.