What is going on with Nadhim Zahawi's tax affairs?

Pressure is continuing to mount on Nadhim Zahawi after he admitted to a tax settlement to HMRC.

Even Prime Minister Rishi Sunak has said that there are "questions that need answering" over his multi-millionaire Tory chairman's tax affairs.

It's a complex tale so let's try and get to the bottom of these questions.

What did Mr Zahawi owe tax on?

The dispute relates to the polling company, YouGov, which Mr Zahawi co-founded in 2000 before he became an MP.

He put his entire stake in the company in an offshore fund called Balshore Investments Ltd, controlled by his parents and based in Gibraltar - a tax haven.

YouGov was sold very profitably in 2018, with Balshore's stake worth an estimated £27 million. Mr Zahawi has said previously that he had never profited from Balshore Investments.

However, an investigation by the tax lawyer Dan Neidle has claimed that is not the case. He alleges he has traced significant funds going from Balshore to Mr Zahawi.

In his most recent statement, Mr Zahawi now says only that he is not currently a beneficiary of Balshore. A significant shift.

Mr Zahawi has also said that HMRC disagreed with him about how many shares he had gifted to his father. He has not disputed that the tax he paid back relates to the capital gains tax owing from the sale of YouGov.

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How much did Mr Zahawi have to pay back?

It's reported that the payment negotiated when Mr Zahawi was chancellor, and therefore in charge of the nation's finances and taxes, was in the region of £4.8 million.

Crucially, part of that was a fine or penalty, imposed by HMRC, for what Mr Zahawi has called "a careless and not deliberate" error.

Who knew what, when?

Well, this is crucial. When reports questioning his tax affairs first surfaced in newspapers in July 2021, his spokesperson claimed that "all Mr Zahawi's financial interests have been properly and transparently declared".

Boris Johnson then chose to make him chancellor. And yet we now know during his short stint in the job he was paying a fine and having to settle up the unpaid tax.

Mr Sunak is now facing tricky questions of his own. Did he ask Mr Zahawi about his tax affairs before he made him party chairman. If not, why?

The prime minister's spokesperson has said that Mr Sunak was not aware that Mr Zahawi had paid a fine to HMRC when he told the Commons that his chair "had addressed the matter in full".

It's the revelation of that fine that seems to have hardened Mr Sunak's stance and prompted him to order an investigation.

Who is threatening to sue who?

This is a story that might never have seen the light of day had Mr Zahawi's lawyers succeeded.

When the tax expert, Mr Neidle, first published his allegations he was threatened by lawyers representing Mr Zahawi that he could be sued for libel. Newspapers reporting the story received similar threats.

Labour have called for the inquiry to cover Mr Zahawi's use of lawyers "to aggressively try to shut down questions" about his tax affairs.

When will we have answers from the inquiry?

Good question. The prime minister's spokesperson has said that it is important that it is thorough and that a specific deadline has not been imposed.

What will be weighing on the prime minister's mind is the approaching local elections in May. The man in charge of the Conservative campaign? Nadhim Zahawi...

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