Page last updated at 18:21 GMT, Thursday, 4 March 2010

David Cameron told 'last month' Ashcroft was non-dom

David Cameron
Mr Cameron says he is pleased Lord Ashcroft has clarified his status

David Cameron only found out last month that his party's biggest donor did not pay full UK tax, Liam Fox has said.

The shadow minister said Mr Cameron "became aware, as far as I know, of the non-dom status in the last month".

Lord Ashcroft admitted he was a "non-dom" on Monday, following years of questions by his political opponents.

It had been thought he had agreed in 2000 to pay full UK tax when he became a peer. But he had agreed to be a "long term resident", a lesser commitment.

'Perfectly legal'

Dr Fox, shadow defence secretary, told the BBC: "I think that it's important to note that that non-dom status is a perfectly legal status, it means that people pay tax on their UK income in the UK and there are many political donors, not least in the Labour and Lib Dem parties, who enjoy that status too."

BBC chief political correspondent Laura Kuenssberg said it suggested that one of the Conservatives' biggest donors had not made his tax status clear to the party leader.

WHAT IS A NON-DOM?
British citizens with interests abroad can register for "non-domiciled" status
This means they can be long-term residents in the UK but do not pay tax on earnings made outside the country
Long-term residents must spend seven of every nine tax years in the UK

Former Conservative chief executive Barry Legg told BBC Radio 4's PM programme if Mr Cameron "does feel that he's been misled by Lord Ashcroft I think now is the time that he should remove him from his post [as Conservative deputy chairman]".

Labour cabinet minister Lord Mandelson told the BBC: "I find it absolutely astonishing that David Cameron should allow all this to drift on. He says now that he was kept in the dark for five years, William Hague was saying yesterday that he was kept in the dark for 10 years."

'Tax exile'
Lord Ashcroft's position as a "non-dom" means he did not have to pay UK taxes on most of his overseas earnings for the past decade.

The then Michael Ashcroft was refused a peerage by the political honours committee in 1999 partly because, according to a letter written by Mr Hague at the time, he was a "tax exile".

In letters to then PM Tony Blair, published by the Guardian, Mr Hague wrote Mr Ashcroft was "non-resident for tax purposes" but told Mr Blair: "He is committed to becoming resident... This decision will cost him (and benefit the Treasury) tens of millions a year in tax yet he considers it worthwhile."

Peter Mandelson: "Difficult to shine a light on what the arrangements were"

Mr Ashcroft was given a peerage in 2000 after he signed a letter to Mr Hague promising to "take up permanent residence in the UK again", which would seem to preclude non-dom status.

But Lord Ashcroft, in a statement earlier this week, said that, after talking to government officials, "the interpretation of the first undertaking of the words 'permanent residence' was to be that of 'long-term resident'".

This was a lesser commitment which would allow non-dom status.

Donations inquiry

Mr Hague, now shadow foreign secretary, told BBC Radio 4's The World Tonight programme on Wednesday he had only found out about the change recently.

He said: "Over the last few months I knew and, after that, of course I was very keen to support him in making that position public."

FROM THE WORLD TONIGHT

In a separate development on Thursday, the Electoral Commission said its 14-month investigation into donations by Bearwood Corporate Services, a firm belonging to Lord Ashcroft, had concluded they were legal.

The inquiry was prompted by a complaint from the Labour MP John Mann.

The Tories said it showed their "clean bill of health with the Electoral Commission remains fully intact" and said continued attacks on Lord Ashcroft were part of "a politically motivated campaign orchestrated by the Labour Party" ahead of the general election.

But Labour MP Gordon Prentice said the public administration select committee had decided to hold a "special one-off inquiry" into Lord Ashcroft's peerage and his tax affairs on 18 March.

However the committee's three Conservative MPs say they will not take part in the inquiry which they said was "clearly a political tactic".



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