A multi-millionaire businessman who became a Labour minister last week has admitted holding part of his personal fortune in an offshore tax haven that experts say could have helped him avoid £3m in tax.

Lord Drayson, the new defence minister, established offshore trusts and companies in the Isle of Man that handled £30m he raised from the sale of his pharmaceuticals business. Experts say such arrangements are normally set up to avoid tax.

His actions, disclosed after inquiries by The Sunday Times, will embarrass the government, which has repeatedly sought to stop wealthy Britons avoiding tax by moving fortunes offshore.

He closed his offshore companies on March 8 this year — the week before Gordon Brown, the chancellor, introduced new laws to restrict British residents’ use of tax havens.

Last week financial experts said a scheme such as Drayson’s could have saved millions in tax. His decision to put the companies into liquidation in March is described as “immaculate timing”.

Yesterday, Drayson admitted holding “financial interests” offshore but said he brought his money back to Britain in the autumn.

Following an approach by The Sunday Times, his spokesman distributed a statement to left-leaning newspapers about the offshore trusts in the hope of diluting the political fallout for Labour.

Drayson was made a Labour peer by Tony Blair in May last year before being promoted to the defence team in last week’s reshuffle.

He has been a prominent Labour supporter since 2001 and has donated more than £1.1m to the party.

The chancellor is known to take a dim view of wealthy individuals who employ leading accountants to devise sophisticated tax avoidance schemes.

The issue has become particularly sensitive because the middle classes have been hit by a series of tax rises — including a clampdown on schemes to avoid inheritance tax on family homes — to pay for Labour’s spending on public services.

The Sunday Times can disclose that Drayson set up two offshore trusts — named Ventana and Amalfi — for him and his wife in 1997 shortly before PowderJect, the company he co-founded, was floated on the stock market.

Each trust, registered in Douglas, the capital of the Isle of Man, held 2.825m shares in PowderJect. Six months later the Draysons formed two offshore companies, Vardale and Sherdley, which were owned by the two trusts.

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