Scotland’s First Minister has urged Nadhim Zahawi to step down after it was revealed he paid a penalty to resolve a multimillion-pound tax dispute.

Prime Minister Rishi Sunak ordered an investigation on Monday, asking new ethics adviser Sir Laurie Magnus on Monday to assess whether the former chancellor breached the ministerial code with the HMRC settlement, with Mr Sunak saying “clearly in this case there are questions that need answering”.

Former chancellor Mr Zahawi said he was “confident I acted properly throughout”, and welcomed the investigation.

Speaking to journalists on Monday, Nicola Sturgeon said Mr Zahawi should step down from his role.

“I think his position … is untenable. I think he should resign his current position as chair of the Conservative Party.

“It seems to be the case … that while he was Chancellor he settled a seven-figure tax bill with HMRC which included a very significant penalty.

“That means, as far as I can see, that there must have been something untoward about his tax affairs to a very large tune, in terms of the amount of money involved.

“I think somebody who is a Government minister in that position, I just think their position is untenable.

“I would think he should resign his post, and if he doesn’t do so, rather than kicking it into the long grass and instructing an inquiry – as the Prime Minister has done this morning – I think the Prime Minister should remove him from office.”