ONE of the Conservative party’s biggest donors misled parliamentary watchdogs when he was being vetted for a peerage, according to official papers obtained by The Sunday Times.

In April 2004, Lord Laidlaw told Lord Stevenson, the head of the House of Lords appointments commission, he “would inform” the tax authorities that he would become a British resident four days after the meeting.

On this basis, Stevenson agreed to recommend Laidlaw, Britain’s 79th richest man, whose wealth is valued at £730m in The Sunday Times Rich List, to the prime minister for a peerage, which was then granted in summer 2004.

However, in a letter sent by Laidlaw to Stevenson last month, the Tory peer admits that he did not become a British resident as promised and continues to live in the tax haven of Monaco.

In a furious response to the admission, Stevenson wrote to Laidlaw last week saying he wanted to make “a number of things crystal clear”.

He continued: “You may take it that had you not told us you were going to take up tax residence immediately, we would have taken a different view on our advice to the PM about your nomination.”

The unprecedented row between the peer and the official vetting committee has been disclosed in documents and memos released to The Sunday Times under the Freedom of Information Act.

The appointments commission believes Laidlaw should now pay all tax he would have been liable for since April 2004 to HM Revenue & Customs (HMRC). During this time, Laidlaw sold his main business for £768m — and is thought to have avoided all tax on the profits as he was offshore.

However, the release of the sensitive documents has drawn an angry response from friends of the peer, who accuse the watchdog of setting out deliberately to tarnish his reputation.

The documents include the note of a key meeting held on April 2, 2004, attended by Stevenson and Laidlaw to discuss the terms of his proposed peerage. The note reveals that Laidlaw had an unusual arrangement with HMRC to only pay tax “in proportion to the number of days he spent in the UK”.

“Mr Laidlaw agreed with the view that members of the Lords should be resident in the UK in order to make a contribution to the work of the house. The new tax year started on April 6, 2004. Mr Laidlaw had consulted his tax advisers and would inform the Revenue of his intention to become resident in the UK for tax purposes as of that date.”

In the wake of the cash for honours scandal, the commission became concerned Laidlaw had failed to fulfil his pledge and become a British resident for tax purposes. Stevenson therefore wrote to Laidlaw asking him to clarify his tax position.

Laidlaw replied in a two-page letter sent on March 21, 2007, giving a range of explanations including his ill health in 2006 for failing to become a British resident. “I have every intention of fulfilling my obligations to the house, provided that my personal circumstances allow me to do so,” he said.

However, he revealed that he was unlikely to become a British resident in the near future. “Given the vote in the House of Commons on replacing the Lords with a fully elected chamber, there is considerable uncertainty on whether both you and I will have a job in the future. I think that more clarity is needed on the government’s plans before making changes in my tax position,” he wrote.

Stevenson wrote a curt reply on April 18, 2007: “I should make it plain that the various reasons in your letter, some personal, some political, for not moving your tax residency are, in our view, irrelevant to the matter in hand which is simply that we expect you to honour the commitment you made. The fact is that we make it clear on our website and elsewhere that we are not prepared to consider nominees unless they are tax resident in the UK.”

Stevenson, who is also the chairman of the bank HBOS, added: “We assume . . . that you intend to honour those commitments by taking up tax residence as from the date you said you would, namely April 6, 2004 (and not, for example, this year or next year or some other time in the future).”

Laidlaw and his businesses have given more than £2.5m to the Tories and loaned a further £2.5m. He founded a successful conference company in the 1970s, which organises 4,000 events annually. Last year he pledged to give the bulk of his fortune to charity.

A Tory peer said: “Irvine [Laidlaw] clearly told the appointments commission what they wanted to hear. I don’t know why the commission is making all this fuss as it just highlights how toothless as a body it is. What are they actually able to do? Nothing.”

A spokesman for Laidlaw said he was “mindful of his obligations” and “currently in discussion with the Revenue”. He declined to comment on the peer’s tax affairs or the release of the documents.

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