Lord Swraj Paul is to be investigated by the House of Lords authorities over claims that he falsely claimed thousands of pounds in expenses.

The Labour donor announced today that he would renounce his non-dom status and pay full UK taxes from next year.

Last week the Conservative party was strongly criticised for not being clear on the domicile and tax status of donor Lord Ashcroft, who pledged in 2000 to take up 'full residency' in the UK.

Lord Paul, one of Britain's richest men, claimed £38,000 in overnight expenses after registering as his main home a flat that he has since admitted he never slept in.

The one-bedroom flat is attached to a hotel he owned in Oxfordshire and was actually lived in by the hotel manager. Lord Paul has justified his naming of it as his main residence because it was available to him for his use.

Lord Paul, who donated £45,000 to Gordon Brown's leadership campaign and £400,000 to the Labour party, has announced he plans to comply with the new rules.

"On the issue of taxation position of peers, of course it goes without saying that I'll be fully complying with the change of law which the government is bringing forward. I strongly support the government proposals in relation to the taxation status of peers and MPs and the membership of the House of Lords and the House of Commons," he said.

Individual domicile is set at birth and can only be changed by transferring life ties - such as clubs, bank accounts and pension arrangements - as well as a promise to live in a country forever.

Lord Paul was last year appointed to the Privy Council - a life-long membership that might make help him change his domicile.

Estimated to be worth £500 million, Lord Paul was 88th on the Times Rich List in 2009. His business Caparo, a car components and metal group is valued at £400 million.