What lesson can learn from Mr Nadim Zahawi?

Mr. Nadhim Zahawi, a successful businessman with a net worth of £100 million, was appointed as Conservative Party Chairman. However, he was recently sacked by Prime Minister Rishi Sunak due to a serious ethical breach in the ministerial code. The breach was related to a tax inquiry involving Mr. Zahawi.

If you are a non-domicile resident in the UK you are not required to pay any tax on your overseas gains. For example, Mrs. Sunak’s non-domicile status would allow her to avoid paying any tax in the UK for inheriting her father’s assets. This rule is applied to anyone living in the UK. 

Mr. Zahawi is a UK domicile and he is required to pay tax on his overseas income or any capital gains. In 2000, Mr. Zahawi co-founded YouGov and transferred 42.5% of the share capital to a trust called Balshore Investments, registered in Gibraltar. The trust later sold the shares for an estimated £27 million in 2018. Mr. Zahawi initially denied being a beneficiary of the trust and claimed that his father, who was believed to be a non-UK resident, was the beneficiary. 

However, Her Majesty’s Revenue and Customs (HMRC) assessed that the majority of the shares belonged to Mr. Zahawi and should be subject to UK capital gains tax. HMRC’s Wealthy Team, who specialised in handling tax cases for wealthy individuals, fast-tracked Mr. Zahawi’s case. He was assessed £3.7 million in capital gains tax and a penalty of £1.1 million, resulting in a total liability of £4.8 million. Mr. Zahawi settled the case in full and HMRC closed the enquiry.

The main issue was Mr. Zahawi’s claim that the error was careless and not deliberate, and the fact that he failed to make the required ministerial disclosures in the tax investigation. This emphasizes the need for integrity, professionalism, and responsibility in all aspects of one’s professional life.