Alistair Darling was on Tuesday forced into a partial retreat from his proposed tax clampdown on non-domiciled foreigners living in Britain, blaming the City furore over the plans on a “misunderstanding” of the government’s intent.

The non dom concessions come less than a month after Mr Darling U-turned on another contentious pre-Budget report measure, bowing to business demands to soften the impact of changes to capital gains tax. Political opponents on Tuesday night accused the chancellor of weakness and incompetence, while tax experts warned the U-turn was not sufficient to prevent an exodus of talent from the UK.