Why did Ashcroft admit he has ‘non-dom’ tax status?

Westminster is abuzz with speculation as to why the Conservative Party's biggest and most controversial donor, Lord Ashcroft, has finally caved into years of pressure to clarify his tax status.

Ashcroft, who is funding a widely publicised £5m campaign to target marginal seats for the Conservatives, previously seemed relaxed about the embarrassment he was causing to his leader, David Cameron. But in a statement today he admitted that he is a 'non-dom'.

"My precise tax status is that of a 'non-dom'. Two of Labour's biggest donors - Lord Paul (recently made a privy councillor by the Prime Minister) and Sir Ronald Cohen, both long-term residents of the UK, are also 'non-doms'," he said, taking the opportunity to point out that his position, by which he only pays tax on money he earns in the UK, is by no means unique to him or his party.

The controversy arose because when Ashcroft was elevated to the Lords in 2000, he was believed to have assured William Hague, then leader of the Tory party, that he would become resident for tax purposes in the UK. Most of Ashcroft's business interests are based in Belize.

Ashcroft today also released a memorandum that he sent to Hague in 2000, which makes clear he only promised to take up permanent residence – an assurance that is fully reconcilable with his status as a non-dom.

The question remains, however: why tell us now?

Admittedly, the Cabinet Office was about to release the information anyway, after a Freedom of Information request was lodged by Labour MP Gordon Prentice. Today, he told the Guardian: "This is absolutely explosive. He says that he has been declaring all his UK income to HM revenue, he's not declaring his worldwide income, he's worth £850m. He should resign from House of Lords immediately."

Ashcroft himself explains in his statement: "I do not want my affairs to distract from the general election campaign." If that is the case, he has failed spectacularly.

Lord Oakeshott, a Lib Dem peer who is campaigning for a change in the law to prevent non-doms from sitting as members of the House of Lords, told the Guardian: "You have someone who keeps his assets offshore out of the British tax system trying to buy a British election."  He suggests Ashcroft's status may make his lavish donations to the Tory impermissible.

Ashcroft might hope that by getting the row out of the way now – rather than waiting for the FoI request to come through – it will be forgotten by the time the general election is actually announced. However, the electoral commission could yet give this story legs: it is already investigating whether £5m worth of donations made from Ashcroft's British company Bearwood Corporate Services should be allowed – and it is unclear whether it will rule before the general election campaign begins.

If nothing else, Ashcroft has taken a hit for his leader, currently the target of mutterings from the right of his party following months of appalling poll results, which culminated yesterday in a YouGov poll for the Sunday Times showing Labour only 2 points behind. As the Mole reports for The First Post today, this translates as an election win for Gordon Brown – remarkable, given the fact that in the last two years he has been written off by almost everyone who knows anything.

One of the key findings of that poll was more people thought Brown understood problems faced "by people like me" than Cameron. News of Ashcroft's exotic tax affairs seem unlikely to disabuse voters of that notion. ·