Nadhim Zahawi has agreed to pay a penalty to HMRC as part of a multi-mullion tax settlement (Picture: Dan Kitwood/Getty Images)

Former Conservative leader Sir Iain Duncan Smith has urged Nadhim Zahawi to come clean over his tax affairs following reports the Cabinet Office minister tried to avoid paying millions of pounds to the treasury.

Mr Zahawi has agreed to pay a penalty to HMRC as part of an estimated £5million-plus tax settlement, apparently negotiated while he was chancellor of the exchequer and in charge of the department under ex-PM Liz Truss.

A source told The Guardian that the penalty was the result of a non-payment of capital gains tax due from the sale of shares worth more than £20million in YouGov, the polling company Mr Zahawi co-founded.

Shadow chancellor Rachel Reeves accused prime minister Rishi Sunak of being ‘too weak’ to address scandals, such as the rows surrounding Mr Zahawi and ex-PM Boris Johnson.

‘It’s going to take a Labour government to clean up this mess, drain the swamp – because, frankly, it stinks,’ she told the BBC.

The 55-year-old confirmed he paid a settlement, saying HMRC officials concluded he had made a ‘careless and not deliberate’ error.

But Labour has accused the government of failing to address the issue after Mr Zahawi refused to answer further questions.

Simon Case, the cabinet secretary, is facing calls to oversee an investigation (Picture: Getty)

And Sir Iain, speaking to the BBC, said: ‘I’m always of the view that the sooner you can get the actual facts out the better. I would say to him, get it all out now and clear it up. I genuinely don’t believe this is a man who’s deceitful.’

Foreign secretary James Cleverly, who carried out a series of TV interviews yesterday, denied Mr Zahawi had done anything wrong but said he did not know the details because he had been ‘having a bit of a rest and doing some shopping’ after a diplomatic trip to the US and Canada.

Simon Case, the cabinet secretary, is facing calls to oversee an investigation. Lawyers for Mr Zahawi had reportedly previously threatened to sue journalists writing about his tax affairs.

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Sir Iain Duncan Smith has urged the minister to come clean.