UK prime minister Rishi Sunak has sacked Nadhim Zahawi as chair of the Conservative party after his ethics adviser found he committed “serious breaches” of the ministerial code by failing to be transparent about his tax affairs.

Sunak finally jettisoned Zahawi on Sunday after weeks of negative coverage in the latest political scandal to hit Britain’s ruling party during a cost of living crisis.

In November, Gavin Williamson quit as a cabinet minister after a slew of bullying allegations. Further investigations are currently taking place into deputy prime minister Dominic Raab over bullying claims, which he denies — as well as former prime minister Boris Johnson over his probity.

Zahawi’s sacking represents a significant U-turn for Sunak who previously stood behind the Stratford-on-Avon MP, claiming in the House of Commons earlier this month that the former chair had “addressed this matter in full”.

In a letter published by Downing Street on Sunday morning, the prime minister said he had intervened in line with his pledge to ensure his government would have “integrity, professionalism and accountability at every level”.

“It is clear that there has been a serious breach of the ministerial code,” Sunak wrote.

But Angela Rayner, deputy leader of the opposition Labour party, said Sunak should now “come clean” on what advice he was given when he appointed Zahawi in November.

“This hopelessly weak prime minister has been dragged kicking and screaming into doing what he should have done long ago,” she said. “Rishi Sunak shouldn’t have needed an ethics adviser to tell him that Nadhim Zahawi’s position was untenable.”

Sunak asked Sir Laurie Magnus, ethics adviser, to investigate Zahawi’s tax affairs on Monday after it emerged that the MP had made a settlement of about £5mn to HM Revenue & Customs last summer — including payment of a penalty.

Magnus’s investigation found that the former Tory chair started his “interaction” with HMRC in April 2021 and settled the dispute in August last year, with a settlement agreement signed in September.

The dispute arose from a 42.5 per cent stake in YouGov, co-founded by Zahawi, which was held by his father through an offshore vehicle in Gibraltar.

The ethics adviser was asked to explore whether Zahawi had behaved with the “highest standards of propriety”. He found evidence of seven breaches of the ministerial code.

Ministers are required to regularly update a declaration of interest form, including details of any tax problems, and discuss potential issues that may arise regularly with senior civil servants.

Magnus said Zahawi had thought his meeting in June 2021 with HMRC was not a formal investigation but “merely being asked certain queries . . . concerning his tax affairs”.

Only on July 15, 2022 did he receive a letter from the tax authority making it clear that an official probe was underway, the MP had said.

“I consider that an individual subject to the HMRC process faced by Mr Zahawi should have understood at the outset that they were under investigation by HMRC and that this was a serious matter,” said Magnus.

The former Tory chair should have informed his permanent secretary and sought their advice, he concluded.

“I would likewise expect a minister proactively to update their declaration of interests form to include details of such an HMRC process,” Magnus added.

When Zahawi was appointed chancellor on July 5 last year he filled in the relevant form with no reference to the HMRC investigation.

Later Zahawi confirmed he was in discussion with HMRC to “clarify a number of queries”. Only after receiving HMRC’s letter on July 15 did Zahawi update his declaration of interests — repeating his previous statement that he was just clarifying inquiries.

As a result, Zahawi failed to meet a requirement in the ministerial code to declare any interests that might be thought to give rise to a conflict of interest, Magnus concluded.

Zahawi also failed to update his information when he agreed a settlement in principle with HMRC in August — waiting until mid-January 2023 to do so.

Last September, he did not disclose enough information to the Cabinet Office, meaning that former prime minister Liz Truss was not made aware of the situation when she appointed him to the cabinet.

Likewise, Sunak was not fully informed when he gave Zahawi a cabinet job in October. These omissions breached the ministerial code, said Magnus.

The report also criticised Zahawi for claiming on July 10 last year that news reports about him being under investigation were “inaccurate, unfair and are clearly smears”. Under the code, ministers must be open with parliament and the public and not give misleading statements.

Zahawi issued a statement on Sunday that did not dispute any of the findings, saying he would support Sunak “from the backbenches” in the coming years.

“It has been, after being blessed with my loving family, the privilege of my life to serve in successive governments and make what I believe to have been a tangible difference to the country I love,” he added.

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