Nadhim Zahawi has been sacked as Tory party chairman after an ethics inquiry into the handling of his tax affairs found a “serious breach” of the ministerial code.

Prime Minister Rishi Sunak had resisted earlier calls from opposition parties to sack Mr Zahawi as Tory party chairman following reports that he had paid a penalty as part of an estimated £4.8m settlement dispute with HMRC.

He had instead asked his new ethics adviser – Sir Laurie Magnus – to assess whether the settlement amounted to a breach of the ministerial code.

In a letter written by Sir Laurie to the PM this morning following the conclusion of the investigation, the ethics adviser said Mr Zahawi had “shown insufficient regard for the general principles of the ministerial code” and had not fulfilled the requirements of being an “honest, open and an exemplary leader”.

In a second letter written by the PM to Mr Zahawi following Sir Laurie’s findings, Mr Sunak said it is “clear that there has been a serious breach of the ministerial code” and announced the removal of the Tory chairman from his ministerial position.

Zahawi fired as Tory party chairman – politics latest

Mr Zahawi had faced pressure in recent days to quit as questions swirled about his finances even after he released a statement to “clear up some of the confusion”.

He admitted he paid what HMRC said “was due” after it “disagreed about the exact allocation” of shares in the YouGov polling company he co-founded – an error he said was “careless, not deliberate“.

But he did not disclose the size of the settlement or whether he paid a fine.

In the correspondence to Mr Sunak released by Downing Street, Sir Laurie said his overall judgement was that the “omissions” by Mr Zahawi regarding his tax affairs “constitute a serious failure to meet the standards set out in the ministerial code”.

In the four-page report to Mr Sunak, dated 29 January, Sir Laurie says:

• Mr Zahawi had a “delay in correcting an untrue public statement” made in July 2022 – in which he told Sky News reports of an investigation were “inaccurate, unfair and clearly smears”

• Mr Zahawi’s contact with HMRC began in April 2021 but he did not declare it

• He failed to declare the ongoing HMRC investigation when appointed as education secretary in October 2021

• He still did not mention the probe when appointed as chancellor in July 2022

• Mr Zahawi reached an in-principle settlement with HMRC in August 2022 – with a settlement in September 2022 along with a penalty – which was not disclosed until January 2023

• He again did not disclose the investigation when appointed Chancellor of the Duchy of Lancaster by former PM Liz Truss in September – or when made Tory party chairman by Mr Sunak in October

• Mr Zahawi “should have understood” that HMRC was investigating “a serious matter”

• The cabinet office “was not in a position to inform the appointing prime minister” about Mr Zahawi’s tax affairs as he failed to disclose the relevant information to the department

• Mr Zahawi’s conduct “has fallen below the high standards” that a PM should expect from ministers

• The Tory chairman showed “insufficient regard” for the ministerial code

Informing Mr Zahawi of his decision to remove him from government, Mr Sunak wrote: “When I became prime minister last year, I pledged that the government I lead would have integrity, professionalism and accountability at every level.

“That is why, following new information which came to light in recent days regarding your personal financial arrangements and declarations, I asked Sir Laurie Magnus, the Independent Adviser on Ministers’ Interests, to fully investigate this matter.

“You agreed and undertook to cooperate fully with the inquiry.

“Following the completion of the independent adviser’s investigation – the findings of which he has shared with us both – it is clear that there has been a serious breach of the Ministerial Code.

“As a result, I have informed you of my decision to remove you from your position in His Majesty’s Government.”

The PM added that Mr Zahawi should be “extremely proud” of his “wide-ranging achievements in government over the last five years”, particularly crediting his “successful oversight of the COVID-19 vaccine procurement and deployment programme”.

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The row surrounding Mr Zahawi had centered on a tax bill over the sale of shares in YouGov – the polling firm he founded worth an estimated £27m – which were held by Balshore Investments, a company registered offshore in Gibraltar and linked to Mr Zahawi’s family.

Mr Zahawi had insisted he was “confident” he had “acted properly throughout”.

Labour, the Lib Dems and former Tory minister Caroline Nokes had publicly called for him to go.

In a statement on Sunday morning, the Lib Dems said Mr Zahawi should also step down from his role as an MP as he is “unfit to serve the people of Stratford-on-Avon”.

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But in a letter to Mr Sunak following his sacking – in which he made no apology for his actions – Mr Zahawi told the PM he can be “assured of my support from the backbenches in the coming years”.

He added that he is concerned “about the conduct from some of the fourth estate in recent weeks”, in a reference to the media.

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Mr Zahawi said: “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: “I am sorry to my family for the toll this has taken on them.

“Your five priorities are the right priorities, and I will do whatever I can to help you deliver them.”

Speaking shortly after Mr Zahawi’s sacking, Levelling Up Secretary Michael Gove told reporters Mr Sunak had taken “decisive action” following the publication of Sir Laurie’s report.

He added: “I don’t think Nadhim should resign as an MP, absolutely not.”

But Labour’s shadow education secretary Bridget Phillipson told Sky News the PM should have sacked Mr Zahawi before now.

Meanwhile, Labour’s deputy leader Angela Rayner and chairwoman Anneliese Dodds have written to the PM calling for him to “come clean” regarding what he knew about Mr Zahawi’s tax affairs.

It is understood that the PM is unlikely to appoint a new Conservative chairman by the end of Sunday.