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Matt Hancock
Matt Hancock is a close political ally of Nadhim Zahawi, the Tory MP and co-founder of polling company YouGov. Photograph: Stefan Rousseau/PA
Matt Hancock is a close political ally of Nadhim Zahawi, the Tory MP and co-founder of polling company YouGov. Photograph: Stefan Rousseau/PA

Offshore company backs crowdfunding firm run by minister's brother

This article is more than 7 years old

Balshore Investments invested in Crowd2Fund, run by Matt Hancock’s brother, as well as owning stake in YouGov

An offshore company that owns a major stake in a polling company founded by a senior Conservative MP has given financial backing to a crowdfunding business run by the brother of a minister involved in crowdfunding regulation, the Guardian can reveal.

Balshore Investments, based in Gibraltar, owns a £20m stake in YouGov, co-founded in 2000 by Nadhim Zahawi, the Tory MP for Stratford-on-Avon. It has invested in Crowd2Fund, founded by Chris Hancock, the brother of the culture minister, Matt Hancock.

Andrew Gwynne, the shadow minister without portfolio, said he would ask the standards commissioner, Kathryn Hudson, to investigate Zahawi’s links to Balshore, saying the MP had “serious questions to answer”.

An investigation by the Guardian has revealed close links between Balshore and Zahawi. He does not declare a connection with the company on the MPs’ register of interests.

As minister of state for skills and enterprise in 2013, Matt Hancock worked in the government department responsible for setting up the regulatory framework for crowdfunding. Zahawi has also promoted crowdfunding as an effective new form of finance.

In 2013, Matt Hancock told the House of Commons: “We are supporting crowdfunding on financial terms, not least through the new business bank, but we are also making sure that it can operate in a high-quality framework. The fact that there will be a regulatory framework around crowd-sourced funding has been welcomed by the sector.”

On a different occasion, Matt Hancock urged a fellow MP “to look also at peer-to-peer finance, whether equity or loan, because that is a small but growing part of the market that companies can look to when trying to access finance”.

Matt Hancock and Zahawi are close political allies and co-authored a book called Masters of Nothing. Chris Hancock told the Guardian he came across Balshore “through a network of people that I sort of know”.

Chris Hancock said he knew Zahawi personally, but the MP was “not involved hands on” in the management of Crowd2Fund and Zahawi was not involved in Balshore’s decision to invest in Crowd2Fund.

He said Balshore had been involved with the initial funding of Crowd2Fund and holds shares in the company.

“Balshore Investments are an investment company and they did a seed round of investment. They also funded YouGov, which is a polling website,” Chris Hancock said.

Zahawi has praised peer-to-peer lending. In one parliamentary debate, he intended to call on businesses to look “beyond the monopoly of the high street banks, at equity options and at some of the innovative new online platforms, [such as] crowdfunding and peer to peer”.

The MP also intended to call for the government to “accelerate the diversification of the financial system our economy needs”. After running out of time to speak in parliament, Zahawi gave an abbreviated version of the speech and posted the rest of it on his website.

Matt Hancock declares his brother’s connection to Crowd2Fund on the ministerial register of interests. Ministers are subject to a more extensive registration system than backbenchers.

Zahawi said he had declared all relevant financial interests. YouGov company documents have referred to Balshore as “the family trust of Nadhim Zahawi’s family”.

Under parliamentary rules, MPs have to declare any shareholding valued at more than £70,000, including those owned through a trust. The Stratford-on-Avon MP did not answer questions about whether he was a beneficiary of a trust.

Gwynne said: “Zahawi has serious questions to answer. Despite being referred to as ‘the family trust of Nadhim Zahawi’s family’ in documentation from YouGov, [Balshore] has not been declared on the register of members’ interests.”

Balshore operates out of a lawyers’ office in Gibraltar, which is known for having a low-tax regime. Balshore’s shares are held by T&T Nominees and one of the directors is Zahawi’s father.

Gwynne said the issue raised concerns about the government’s commitment to cracking down on offshore tax havens.

“The government’s record on tax avoidance is awful. Despite the rhetoric from Theresa May, no one believes that the Tories really want to get rid of the scourge of tax avoidance,” he said.

The Financial Conduct Authority recently approved Crowd2Fund to offer the innovative finance Isa, which allows investors to receive tax-free interest from peer-to-peer investments.

On its website, the company says it “is an alternative solution to an out-of-date financial system, and the only FCA-regulated crowdfunding platform to offer five models of finance, across debt and equity investments”.

Matt Hancock did not respond to requests for comment.

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