SIR John Butterfill, the Bournemouth West MP, paid no capital gains tax after making a £600,000 gain on the sale of his taxpayer-funded house which he told the parliamentary authorities was his designated second home, the Daily Telegraph website claims.

For five years, Sir John submitted regular claims under the second home allowance for the cost of running his six-bedroom country house, which had a swimming pool and extensive grounds. He claimed £17,000 on servants’ quarters alone.

At the time, he designated a small flat in his Bournemouth constituency, bought for £56,000, as his “main home”.

A good MP but now he must go - constituents views today.

When he sold the country property for £1.2 million in 2005, however, he informed HM Revenue & Customs that it was his “primary residence”, meaning he was exempt from capital gains tax.

The Telegraph story continues: The house in Woking, Surrey, 80 miles from his constituency, doubled in value while the taxpayer was contributing up to £1,778 a month towards the mortgage interest. Sir John was also reimbursed for council tax bills for the “staff annex”, where his housekeeper and odd job man lived.

The national newspaper claims Sir John was able to avoid capital gains taxes of 40 per cent by making contradictory declarations to Parliament and the tax man.

The declarations did not break the law.

He confirmed that he used part of the proceeds from the sale to pay for a £880,000 London town house. This house is now worth an estimated £1million.

The £600,000 gain he made on the sale of the Surrey house dwarfs that of other MPs criticised for failing to pay capital gains tax.

Yesterday, Sir John told the Daily Telegraph that he had spent as much as £500,000 of his own money “transforming (the house) from a wreck”. He said his profit on the sale of the house was therefore more like £100,000 than £600,000.

The MP is now expected to pay at least £40,000 in capital gains tax, the appropriate payment for a profit of £100,000.

He has also agreed to refund more than £20,000 for the claims he made for his staff annex and repairs on the Bournemouth flat, making his total repayments the highest of any MP to date.

The claims are said to have alarmed David Cameron, the Tory leader, who wants to distance his party from the lavish lifestyles – paid for with second home allowances – enjoyed by some grandees.

Asked why he had not paid tax on the sale of the house he had designated as his second home for the purposes of his parliamentary allowances, Sir John told the Telegraph: “It seemed to me that that was the house I had in order for me to get to London, so it wasn’t unreasonable for me to use as my second home.

“It was always the larger property so I told the Inland Revenue it was my main home. That was why I didn’t pay capital gains tax.”

On last night's Newsnight Sir John said the Telegraph story was a 'gross misprepresentation of what I said to the young lady'.

He did agree he'd extended his house to include a wing for his gardener and his gardener's wife, but said he had probably made a loss of the rennovations and had doing nothing unacceptable.

An MP since 1983, Sir John was knighted in 2003 for his services to Parliament. He is treasurer of the 1922 committee of backbench MPs.