HMRC say that Nadhim Zahawi’s tax error wasn’t innocent mistake

Nadhim Zahawi did not make an “innocent error” in his tax affairs, the head of HM Revenue & Customs has suggested.

The Conservative Party chairman says HMRC told him he had made a “careless but not deliberate error” that led to a settlement of about £5 million, including a significant fine, when he was chancellor.

Jim Harra, chief executive of HMRC, made clear that being “careless” did not mean someone had made a simple mistake.

“Carelessness is a concept in tax law,” he told MPs on the public accounts committee. “It can be relevant to how many back years we assess. It can be relevant to whether someone is liable to a penalty. There are no penalties for innocent errors in your tax affairs.

“If you take reasonable care but nevertheless make a mistake, you would be liable for the tax and interest if it’s paid late. You would not be liable for a penalty, but if your error was as a result of carelessness then legislation says a penalty applies in those circumstances.”

Rishi Sunak will gather ministers today at Chequers, his grace-and-favour home in Buckinghamshire, for a cabinet awayday to discuss progress on his five pledges, which include restoring economic competence and tackling NHS waiting lists.

Isaac Levido, a senior adviser, will give a presentation but Zahawi is not expected to play a significant role.

Levido believes that there is a “narrow path” to victory with opinion polls putting Labour more than 20 points ahead since last summer. He believes Labour’s lead is stronger than it looks and internal polling suggests that the Tories have regained their lead on economic competence.

Sunak is said to be “livid” with Zahawi after he admitted at the weekend to paying a penalty for tax avoidance. He has asked Sir Laurie Magnus, the independent adviser on ministers’ interests, to investigate Zahawi. Magnus is expected to report within two or three weeks.