Page last updated at 08:35 GMT, Tuesday, 14 July 2009 09:35 UK

Tax exile party donations capped

Lord Ashcroft
Lord Ashcroft's donations upset many Labour MPs

Tory donor Lord Ashcroft is facing fresh pressure to declare whether he pays taxes in the UK after the Commons passed new party funding rules.

The move, which was nodded through by MPs without a vote, will cap donations from non-UK tax payers at £7,500.

It will not directly bar Lord Ashcroft's gifts to the Tories, which are made through a UK-based firm.

But Labour critics believe it will be difficult for him to keep funding the party unless he pays taxes in the UK.

Lord Ashcroft was made a Conservative peer in 2000 after giving an assurance that he would pay UK taxes, but has since refused to discuss his tax affairs saying that they are private.

Tory leader David Cameron and other senior Conservatives have also refused to comment.

'Buying votes'

The peer, who is the Tories' deputy chairman, has been pouring cash into key marginal constituencies in an effort to boost Tory candidates' chances at the next election.

The money is used for mail shots, phone canvassing and other marketing efforts.

What actually we see here are the dying embers of a rudderless government that, once again, has failed to be able to control its backbenchers
Jonathan Djanogly

Labour MPs have accused the Tories of trying to "buy" votes - but the Tories say the payments simply levels the playing field with incumbent Labour MPs, who get a Parliamentary allowance to communicate with their constituents.

Labour has long suspected Lord Ashcroft is domiciled for tax purposes in Belize, where he has extensive business interests.

But the Tories insist Lord Ashcroft's donations are legal under electoral law requiring donors to be registered to vote in the UK and for companies making donations to be registered at Companies House.

Lord Aschroft's donations are made via his British-based company Bearwood Corporate Services.

The Political Parties, Elections and Referendums Act 2000 makes no restriction on donors' tax status.

But Monday evening's amendment to the Political Parties and Elections Bill, which is aimed at cleaning up politics in the wake of the expenses scandal, will effectively ban gifts of more than £7,500 from individuals who do not pay UK taxes.

It would not directly ban Lord Ashcroft's donations, but Labour MPs believe it will put pressure on him to clarify his tax position.


Under the changes, donors would have to be "resident, ordinarily resident and domiciled" in the UK in the previous tax year.

The amendment was tabled in the House of Lords by the veteran Labour peer, Lord Campbell-Savours, who has been campaigning against tax exile donations.

Justice Secretary Jack Straw had originally planned to overturn the measure when the Bill returned to the Commons, on the grounds that it would be unworkable.

People who go abroad for tax purposes should not be interfering in our elections
Martin Linton
Labour MP

However, he shifted his position after a meeting with Labour MPs and peers last week, and instead tabled a series of minor technical amendments to assist implementation.

The changes were waved through by MPs after the Tories indicated they would not vote against them.

Mr Straw told MPs it would take "some time" to ensure that regulations were brought in and guidance was established so they were "workable".

"Overall, I think that it is possible to make the sentiment behind these amendments in the other place workable. That's what we've sought to do," he said.

But Mr Straw said the change would only be implemented after discussion with other parties and the Electoral Commission, because "further steps" would be required to link donations to tax status.

The changes were nodded through after the Tories indicated they would not vote against them.

But Shadow Solicitor General Jonathan Djanogly said they had shattered the cross-party consensus on the Political Parties and Elections Bill, which is being rushed through Parliament in response to the expenses scandal.

He said the government had opposed the amendment in the Lords because it was "unrealistic" but now backed it - and he urged ministers to explain "why this u-turn came about".

"What actually we see here are the dying embers of a rudderless government that, once again, has failed to be able to control its backbenchers," he said.

Labour backbencher Martin Linton said stopping such donations was part of cleaning up politics.

"People who go abroad for tax purposes should not be interfering in our elections," he said.

"If they don't pay our taxes, why should they have any right in determining what those taxes are?"

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