Don't mess with the taxman.
What began as a blog entry by Clifford Chance's ex-head of tax has snowballed into a political scandal which threatens to claim the head of Nadhim Zahawi, the Tory party chairman.
Dan Neidle, who left Clifford Chance to set up Tax Policy Associates, spotted that a Gibraltar company linked to Zahawi was held by a trust controlled by the MP's parents. He surmised that after setting up YouGov, Zahawi had given them his founder shares in the company to avoid tax. When he said as much in a blog, Zahawi called in the lawyers.
Neidle told RollOnFriday, "the next bit - the legal threats from Zahawi - was so weird. I couldn't believe he was doing it. And it made me certain he was trying to hide something..."
Instead of retreating, the tax lawyer drew attention to Zahawi's shifting excuses and heavyhanded tactics by publishing the correspondence he received from Osborne Clarke threatening legal action if he didn't back off.
"It’s outrageous that Zahawi thinks he can not only use libel law to shut people up, [but] do it in secret", recalled Neidle, who took his complaint to the SRA.
The regulator responded by warning solicitors to "ensure that you do not mislead recipients of your correspondence" by "labelling or marking correspondence ‘not for publication’, ‘strictly private and confidential’ and/or ‘without prejudice’ when the conditions for using those terms are not fulfilled".
"Such markings cannot unilaterally impose a duty of privacy or confidentiality where one does not already exist", it said.
Neidle's prime target continued to evade questions about his obscure tax affairs, but in January reporters discovered that while he was chancellor, Zahawi had paid millions to HMRC to settle an outstanding tax bill, which included a 30% penalty for 'carelessness'.
The revelation that Zahawi had been conducting negotiations with tax inspectors over apparent tax avoidance at the same time that he was effectively in charge of HMRC led to calls for his resignation.
The scandal prompted Rishi Sunak to concede that there are "questions that need answering", and he has ordered an investigation into the matter by the government's independent ethics adviser.
Neidle said, "I thought he was hiding a failed tax avoidance scheme - I had no idea he was actually hiding the fact he was - AT THAT VERY MOMENT - going to HMRC to pay up for the failed scheme".
The tax lawyer told ROF he had more projects in the pipeline which were "much less politically sexy than the Zahawi story, but I think ultimately much more important. One of them involves bad tax behaviour on a much larger scale than Zahawi. Another involves bad institutional failure which has affected hundreds of thousands of people".
Neidle said, "the pressure would have been hard to bear if not for the huge amount of support I've had. Former colleagues. Former clients. A large information team of accountants, lawyers, KCs, retired HMRC officials. I'm sure Zahawi had a large and well paid team, but it can't have been a patch on mine".
Zahawi did not respond to a request for comment, and Osborne Clarke declined to comment.
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