The Prime Minister asked his independent adviser on ministerial interests to look into Mr Zahawi’s tax settlement with HM Revenue and Customs as he appeared to be “hanging on by a thread” in his Cabinet post.

The furore centres around an agreement that Mr Zahawi reached with the taxman over the sale of shares in the polling company YouGov, which he co-founded.

Mr Zahawi is believed to have paid a penalty as part of the deal, taking the total estimated settlement to around £4.8 million, though the figures have not been confirmed.

Mr Zahawi claimed that his “error” over the YouGov shares was “careless and not deliberate”.

But his future as party chairman was cast into doubt by Mr Sunak’s move.

On a visit to Northampton hospital, the Prime Minister said: “Integrity and accountability is really important to me and clearly in this case there are questions that need answering.

“That’s why I’ve asked our independent adviser to get to the bottom of everything, to investigate the matter fully and establish all the facts and provide advice to me on Nadhim Zahawi’s compliance with the ministerial code.

“I’m pleased that Nadhim Zahawi has agreed with that approach and has agreed to fully co-operate with that investigation.”

Mr Sunak’s announcement came as BBC chairman Richard Sharp on Monday asked the broadcaster’s nominations committee to look into any conflicts of interest as questions grew over his involvement in an £800,000 loan guarantee for Boris Johnson when he was prime minister.

In an email to all BBC staff this morning, Mr Sharp said he wanted to ensure “all the appropriate guidelines have been followed” and asked the broadcaster’s board to review any potential conflicts of interest.

On Mr Zahawi, the Prime Minister said the ethics adviser, Sir Laurie Magnus, had been requested to “fully investigate this matter and provide advice to me on [his] compliance with the ministerial code”.

He added that on the basis of his findings “we’ll decide on the appropriate next steps”.

Mr Sunak confirmed Mr Zahawi would continue in his role as Conservative party chairman.

“As is long-standing practice, he will continue to play the role he does,” he said.

In a statement, Mr Zahawi said: “I am confident I acted properly throughout and look forward to answering any and all specific questions in a formal setting to Sir Laurie.”

But Labour called for Mr Sunak to sack his party chairman.

Shadow business secretary Jonathan Reynolds told Sky News: “The position to me is completely untenable. I don’t think the excuses are compelling… and the sums of money here are not small.”

Mr Sunak is also facing scrutiny over his decision to re-appoint Dominic Raab as Deputy Prime Minister and Justice Secretary.

Mr Raab is facing a series of bullying claims from his earlier time in Cabinet which are being investigated by senior lawyer Adam Tolley KC.

The Deputy Prime Minister denies any wrongdoing.

But senior Tory MP Tim Loughton said he would have to “take the consequences” if more emerges about his tax affairs. The former minister added that he believes Mr Sunak “will take the appropriate action” if more damaging details emerge about Tory party chairman Mr Zahawi’s tax settlement with HMRC.

Former Downing Street communications chief Sir Craig Oliver said Mr Zahawi is “hanging on by a thread” in his post.

“The problem for Nadhim Zahawi at the moment is it doesn’t all add up.”

Earlier Mr Zahawi had sought to end questions about his tax affairs by releasing a statement.

When YouGov was set up, Mr Zahawi reportedly did not take any shares in it but a 42.5 per cent shareholding was allegedly received by Balshore Investments, a Gibraltar company held by an offshore trust controlled by his parents.

He admitted that questions were raised about his tax affairs when he was being appointed Chancellor.

Mr Zahawi said: “Following discussions with HMRC, they agreed that my father was entitled to founder shares in YouGov, though they disagreed about the exact allocation,” he said.

“They concluded that this was a ‘careless and not deliberate’ error.”

Evening Standard – News