The importance of HMRC comments on the Nadhim Zahawi case

This leapt out at me from HMRC boss Jim Harra's evidence to the Public Accounts Committee (PAC) about Zahawi.

He was asked by Labour and Co-op MP Meg Hillier about when tax assurance commissioners adjudicate on tax settlements.

He said: "I suspect you are referring to a particular case" - which means the Zahawi case.

He continues: "We have published our code of governance for how we govern decisions in disputes with taxpayers, and when the tax assurance commissioners and other commissioners will make the decision.

"And all cases are subject to that governance without exception."

You may think "boring" and "so what". But what struck me was that Harra said "disputes with taxpayers".

I assume Harra chooses his words with care, so there is the implication that HMRC was "in dispute" with Zahawi over his unpaid tax.

The point is that Zahawi has framed his public statements about his settlement with HMRC to play down any suggestion of a "dispute" with HMRC.

He talks about "discussions" with HMRC and a "disagreement" with the tax authorities about what percentage of his YouGov founder shares held in the tax haven of Gibraltar belonged to him rather than to his dad.

But if Harra has just told us there was in fact a "dispute" between HMRC and Zahawi, that has a connotation somewhat different from a "discussion".

For starters, it would make it even more intriguing that Boris Johnson appointed him as chancellor of the exchequer in July, when the primary responsibility of any chancellor is to set tax policy for the nation rather trying to settle a dispute with HMRC about his own tax liabilities.

So Harra has added sharper focus to the inquiry by the prime minister's ethics adviser Magnus into Zahawi's tax affairs.

In particular Magnus will need to know whether there was a formal dispute between Zahawi and HMRC, if so when it started, whether the Cabinet Secretary, cabinet office proprietary and ethics officials and the Treasury permanent secretary all had the full picture, and what the former Prime Minister Boris Johnson knew when appointing him as chancellor.

Harra made clear today that all of this can be cleared up by Magnus, because he also told the Public Accounts Committee that he is prepared to give Magnus confidential details of Zahawi's tax settlement so long as Zahawi gives permission to HMRC.

Presumably Zahawi will give permission, because he has already said he will fully cooperate with Magnus's inquiry, confident as he is that his actions as a minister of the crown were not compromised.

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