THE Conservative party is being investigated by the Electoral Commission over allegations that it stands to make £15m in a complicated financial transaction involving the sale of its former headquarters in Smith Square, central London.

The investigation is believed to centre on the role played by a consortium of Middle Eastern businessmen in the deal.

The reason for the commission’s interest is that suspicions have been raised that the transaction could represent a disguised donation to the party by a foreign donor, breaching electoral rules.

Last night a spokeswoman for the Electoral Commission confirmed that an inquiry was under way but declined to give further details.

A Conservative party spokesman said: “We are not aware of any investigation or that anyone in the party has been approached by the Electoral Commission about this matter.”

The Conservatives, who moved into Central Office in 1954, shifted their headquarters to nearby Victoria three years ago. They retained a lease on the old building, however, and in March this year bought the freehold for Central Office and neighbouring buildings for just over £15.5m using a loan from Allied Irish Bank.

They bought the property from Platinum Overseas Holdings, based in the British Virgin Islands and reportedly owned by the Middle Eastern businessmen.

Now, just five months after buying the freehold, the party is in an advanced stage of talks to sell it on for about £30m.

If concluded, the deal would represent a profit of nearly £15m in only a few months.

This has given rise to allegations that the transaction could be used to circumvent laws on how parties are financed and to raise millions of pounds from foreign donors.

It has also brought suspicions the Tories are trying to rush the deal through before September 11, after which parties will have to give details of every loan and donation from any source.

Martin Salter, Labour MP for Reading West, said: “The Tories need to come clean and end the culture of secrecy that continues to surround their funding.”

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