💬 Opinion: The most interesting aspect of this very public HMRC settlement is the penalty of 30 per cent, which appears to be a favourable result for Zahawi and his advisers in the circumstances we know about, writes nimshah14
Zahawi said in his statement that he reached the settlement with HMRC on the basis that he made a “careless but not deliberate” error – this is very purposeful language that specifically relates to the tax legislation on penalties.
There are then three categories of behaviour to determine the penalty rate: ‘careless/lack of reasonable care’, ‘deliberate’ and ‘deliberate and concealed’. ‘Careless’ behaviour means that the taxpayer failed to take reasonable care in relation to their tax affairs and can be likened to ‘negligence’. Yes – there is a degree of subjectivity on this and HMRC are broadly looking at what the taxpayer did or failed to do and whether the reasonable taxpayer would have acted the same or differently.
There is a question over whether Zahawi has a connection to an offshore trust structure, known as Balshore Investments, based in Gibraltar – Zahawi has strongly denied this but there are references to Balshore in the historic publicly filed accounts of YouGov. For the purposes of determining the offshore penalty rate, Gibraltar is a ‘Category 2’ territory, which can enhance the penalty by 150 per cent – taking the range up to 37.5 to 45 per cent.
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