(Bloomberg) -- UK Conservative Party Chairman Nadhim Zahawi acknowledged being “careless” with his tax affairs and said he settled a bill over shares in a polling company he co-founded, seeking to defuse a controversy threatening to knock Rishi Sunak’s government off course.

The issue adds to the perception that Sunak’s party is out of touch with the struggles of ordinary Britons during a record squeeze on living standards. It surfaced when Zahawi was appointed Chancellor of the Exchequer last July. At the time, he sought to shut down questions on the matter as a personal smear.

In an emailed statement Saturday, Zahawi suggested the stock had been held by his father, who had helped set up YouGov more than 20 years ago and “took founder shares in the business in exchange for some capital and his invaluable guidance.” Zahawi’s remarks follow a Guardian report that he’d paid a £4.8 million ($6 million) bill to His Majesty’s Revenue & Customs, including a 30% penalty for not settling the correct amount at the right time. 

“Following discussions with HMRC, they agreed that my father was entitled to founder shares in YouGov, though they disagreed about the exact allocation,” Zahawi said. “They concluded that this was a ‘careless and not deliberate’ error. So that I could focus on my life as a public servant, I chose to settle the matter and pay what they said was due.”

It’s another headache for Sunak, whose own finances came under scrutiny less than a year ago, when it was revealed his multi-millionaire wife, Akshata Murty, enjoyed non-dom status, meaning she didn’t have to pay British taxes on her worldwide income. She later agreed to pay British taxes.

The Tories trail Labour by more than 20 points in recent polls, leaving the premier with a sizable challenge to repair his party’s fortunes in time for a general election that he must hold in two years’ time at the latest.

“In the middle of the biggest cost-of-living crisis in a generation, the public will rightly be astonished that anyone could claim that failing to pay millions of pounds worth of tax is a simple matter of ‘carelessness,’” opposition Labour Party Chair Anneliese Dodds said in a statement. 

‘Murky Affair’

She said Zahawi’s statement “blows a hole” in his previous accounts of “this murky affair,” and called on Sunak to sack him and spell out what he knew and when.

Tax Justice UK Executive Director Robert Palmer also called Zahawi’s position “unsustainable,” and warned that the matter shows that it’s still possible for “rich, powerful people to find ways or attempt to find ways of lowering their tax bills.” 

The Guardian said the tax bill related to capital gains on the sale of YouGov shares worth more than £20 million held through Balshore Investments, a family trust based in Gibraltar. 

“HMRC agreed with my accountants that I have never set up an offshore structure, including Balshore Investments, and that I am not the beneficiary of Balshore Investments,” Zahawi said. He didn’t specify the amounts involved. 

Zahawi said the matter was resolved in September, when Liz Truss named him chancellor of the Duchy of Lancaster — a post in the Cabinet Office. Sunak appointed him party chairman in October, by which time “all my tax affairs were up to date,” Zahawi said.

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