William Hague was said to be aware 10 years ago of a deal struck by senior Tories that eventually resulted in Lord Ashcroft secretly remaining a non-dom after obtaining his peerage, according to official documents released today.

Hague, the former leader of the Conservative party who had been lobbying for the billionaire to secure a seat in the House of Lords, has repeatedly insisted that he was only told earlier this year that Ashcroft was a non-dom, and therefore not paying full UK tax on all his earnings.

But previously confidential parliamentary correspondence published today showed that Hague's chief whip, James Arbuthnot, was instrumental in lobbying for Ashcroft not to have to give up tax privileges on his massive overseas earnings – despite assurances given by Hague that he would pay "tens of millions" to the Treasury.

The papers also include a letter from Arbuthnot which suggests that Hague was fully aware of the deal between the Cabinet Office and Ashcroft.

This raises fresh questions for Hague, the shadow foreign secretary, who was forced to speak about the issue today for the first time after some of the documents were leaked to the BBC. He has denied being aware of the full details of the deal.

After a decade of refusing to clarify his tax status, Ashcroft revealed three weeks ago that he was a non-dom, appearing to contradict assurances made on his behalf by Hague, who fought hard to secure his seat in the Lords 10 years ago.

The political honours scrutiny committee repeatedly made it clear that Ashcroft's elevation was dependent on him giving a promise that he would return to the UK and become a UK taxpayer. The peerage was agreed after Ashcroft gave a "solemn and binding undertaking" in writing that he would become permanently resident in the UK. Instead of becoming a permanent resident, however, he became a "long term resident" – a distinction that allowed him to avoid paying UK income tax on all his worldwide earnings.

The correspondence released today by the public administration committee revealed for the first time that Arbuthnot was deeply involved in the negotiations that led to the downgrading of Ashcroft's undertaking.

Arbuthnot, who was said to be acting as an intermediary for Ashcroft, insisted that the billionaire – under the terms of the assurances he had given – could take up his seat in the Lords despite not being domiciled in the UK for tax purposes.

Sir Hayden Phillips, a senior civil servant, eventually agreed with Arbuthnot in July 2000 that Ashcroft needed only to become a long-term resident in order to comply with the undertakings he had given. In turn, Arbuthnot replied within hours, saying: "I confirm that I agree with your understanding of the position." He added: "The leader of the opposition is satisfied that the action adequately meets the terms of Michael Ashcroft's undertaking to take up permanent residence in the UK."

The terms of that deal shocked members of the political honours scrutiny committee. Lady Dean, one of the two surviving members of the committee, said today: "We were continually of the view that Lord Ashcroft would maintain his undertaking to take up permanent residence ... It looks like the commitments and undertakings given were not carried through."

The papers released today also show the scrutiny committee was determined that Ashcroft should honour the assurances he had given. The secretary of the committee had even suggested the businessman might be asked to show copies of Inland Revenue forms as proof that he was a full UK taxpayer; the IR Form P86, denoting arrival in the UK, and IR DOM1, proving he had become domiciled and would pay full tax. It repeatedly asked for evidence that this had been done before the undertaking was revised. The documents also show that all parties emphasised Ashcroft should live in the UK to become a full working peer and attend parliament regularly. But his Lords records show he has not spoken in a debate in the last year and has attended only 15% of votes.

A spokesman for Hague insisted tonight that he had delegated the issue to his chief whip. "He didn't know any of the details [in 2000]. He asked James Arbuthnot to deal with the issue and make sure Downing Street was satisfied. He did. That was it," he said. However, Hague did concede today that he should not have promised that Ashcroft would pay tens of millions of tax.

The foreign secretary David Miliband said that the letters proved that Hague was "intimately" involved in the process. He said: "It is now clear there has been a decade of deception at the top of the Conservative party and I repeat my call … that David Cameron sacks Lord Ashcroft."