Multimillionaire former tax exile resigns before taking up post as Conservatives' super-rich backers come under renewed scrutiny

David Cameron was embarrassed this afternoon when the multimillionaire property magnate set to become the new Conservative party treasurer quit before even taking up his post, as the coalition government's relationships with high-profile businessmen came under increasing scrutiny.

Conservative central office put out a press release saying that David Rowland would not be taking up the role raising funds for the party "due to the expansion of his global business interests".

Since its announcement in June, Rowland's appointment has been dogged by criticism over his former status as a tax exile. After he made a £1m donation to the Tory party last year, it emerged that Rowland had lived in Guernsey for tax purposes but returned to full UK residency to be able to donate to the party legally.

"Due to the expansion of his global business interests, David Rowland has decided not to take up his planned role as treasurer of the Conservative party," the statement read. It quoted Rowland as saying: "I was honoured to be asked to become treasurer. Unfortunately my developing business interests mean I will not have the time to give that role the focus and attention it deserves."

Rowland is a property magnate who, with his son Jonathan, is estimated to be worth £730m, making them, it is said, the 25th richest people in Britain. In the 12 months before this year's election he gave £2.7m to the party.

The current treasurer, Stanley Fink, will now continue in the role until another replacement is found.

The leading Tory blogger Tim Montgomerie said: "Big questions need to be asked about [Tory HQ] failing to carry out due diligence on this appointment."

Criticism of Rowland has intensified since the appointment of Sir Philip Green to advise on efficiency savings as part of the government's cost-cutting drive.

Green banked the biggest pay cheque in corporate history in 2005 when his Arcadia fashion business, which owns Topshop, paid a £1.2bn dividend. The record-breaking payment was paid to his wife, Tina, who lives in Monaco and is the direct owner of Arcadia. As a result, no UK income tax was due.

Yesterday, Nick Clegg repeated the coalition's pledge to crack down on tax avoidance, suggesting he may be lobbying behind the scenes for renewed movement in this area to prove intent, despite Green's appointment.

An adviser to Vince Cable, Matthew Oakeshott, said that Green should be paying tax in the UK. "It must be right for any British people in prominent positions in public life to be firmly resident and domiciled in the UK for tax purposes."

Roger Williams, Liberal Democrat MP for Brecon and Radnorshire, said that while Green was "very capable", the reports of his tax arrangements should be "looked at" by HMRC and the Treasury.

"We are very keen that artificial arrangements are minimised," Williams told the Guardian. "What it brings home to me and my constituents is that rich people can arrange their financial affairs with a great deal more latitude [than the less rich]."

Mike Hancock, Lib Dem MP for Portsmouth South, told the Financial Times he had "great concerns" about Green's appointment. "I'm all in favour of anyone who avoids tax to be tackled firmly and I'm surprised that Clegg would want to appoint someone like that to advise him," he said.