David Cameron was on Tuesday night questioned over the strength of his commitment to push through a law requiring that all British legislators pay full taxes in the UK.
The issue has taken centre stage after the disclosure that Zac Goldsmith, the party’s candidate in Richmond in Surrey, was non-domiciled for tax purposes – a situation he is now ending.
Meanwhile, Labour MPs have repeatedly called on Mr Cameron to make clear whether Lord Ashcroft, deputy chairman of the party, is resident in Britain for tax purposes.
The Conservative leader said at the weekend that all MPs and Lords would have to demonstrate they were “a full UK taxpayer”.
But Mr Cameron’s initiative prompted a row over tax law on Tuesday as Labour questioned the wording of a Tory amendment to the constitutional renewal bill.
The amendment suggested that any UK legislator has to be “domiciled and ordinarily resident in the UK”.
But one Labour figure said that this was critically different to “domiciled and resident in the UK”. “For example, they would not be liable for UK tax for income generated abroad, and would only be liable for UK tax on certain income generated in the UK,” he said.
Jack Straw, justice secretary, accused Mr Cameron of tricking the public by offering an amendment that fell short of his promise.
“David Cameron said he wanted to legislate to make all MPs and peers full UK tax payers. But as ever with the Conservative leader, what you see is not what you get,” said Mr Straw.
“Read the small print of the Tory amendments and you’ll find a loophole that would enable individuals to escape UK tax on their foreign earnings.”
A Tory spokeswoman denied that the phrasing was an attempt to create a loophole of any kind. She said the phrase “ordinarily resident” had been chosen as the “widest possible term” for a British taxpayer.
“This is not us trying to find some loophole to let people off the hook,” she said. If the amendment is rejected the Tories will seek to put the law on the statute book in the next parliament.
Earlier Stephen Pound, a Labour backbencher, called for an official investigation into Lord Ashcroft, one of the Tory party’s largest donors, over his failure to register his interest in a company called Mayfair Limited. Mr Pound has written to the Registrar of Lords’ Interests to demand a probe.
Lord Ashcroft gave an undertaking to pay UK taxes in 2000 when he became a peer but has since refused to comment on his tax status because it is “a private matter”. Senior Tory MPs have said they believed he had fulfilled those obligations imposed on him.
Mr Pound said the public deserved to have “full knowledge of the facts” because Mayfair Limited is incorporated in Belize, in central America, and the peer has asked questions in the Lords about that country.
However, Alan Kilkenny, spokesman for Lord Ashcroft, told the Financial Times the accusations were groundless because Mayfair was merely a holding company with trading subsidiaries which were fully disclosed in the register of interests. “I’m very happy for you to inquire about proper stories,” he said, before hanging up the phone.
Labour strategists are hoping to home in on Lord Ashcroft during Wednesday’s prime minister’s questions, when Harriet Harman will be standing in for the prime minister. Advisers are said to have prepared “put-down lines” about the peer for the leader of the Commons to use in the weekly joust.