Sunak 'warned' of risk to his reputation from Zahawi row

Downing Street denies issue discussed with prime minister

- DOMINIC MCGRATH

Rishi Sunak received informal advice in October that there could be a reputational risk to the government from Nadhim Zahawi's tax affairs, it has been reported. Government officials are said to have given the new prime minister informal advice as he drew up his cabinet in October, regarding the risks from an HMRC investigation settled only months earlier.

Mr Sunak has come under pressure over his decision to appoint Mr Zahawi as Tory party chair, with questions too asked about his political judgement in doing so. He has insisted that "no issues were raised with me" when he appointed Mr Zahawi to his current role.

Downing Street has strongly denied the claim that Mr Sunak was warned of the risk. A No 10 spokesperson said: "These claims are not true. The prime minister was not informed of these details, informally or otherwise."

The Independent revealed in July last year that HMRC was investigating Mr Zahawi and his tax affairs after inquiries were launched by the National Crime Agency and the Serious Fraud Office. The chancellor denied this and threatened to take legal action. According to The Observer, Mr Sunak was warned back in October that the tax issue involved a significant amount of money.

The prime minister ordered an investigation into Mr Zahawi by Sir Laurie Magnus, his independent adviser on ministers' interests, after the Tory chair paid a penalty as part of the dispute. Mr Zahawi is believed to have authorised HMRC to discuss his settlement - estimated to be worth £4.8m including the penalty - with the ethics inquiry.