The Chancellor Alasdair Darling has changed his plans to demand further financial information from non-domiciled foreigners (non-doms) living in the UK, as well as changing the rules surrounding the payment of £30,000 levy on non-doms who have been resident in Britain for over seven years.

Draft legislation originally appeared to be clamping down on some perceived loopholes in the legislation and outlined how non-doms would need to provide the Government with details of their foreign earnings, and pay tax on income and capital gains from offshore trusts, as well as the levy.

These proposals worried many businessmen in London, who feared an exodus of wealthy non-doms to other countries with more lenient tax laws which could subsequently affect both the economy and the housing market. But on Tuesday the Treasury said proposals to tax the foreign earnings of non-domiciled workers would be dropped, along with demands that they disclose income from offshore trusts. It also said that there would be no charges for money brought into the UK to pay the £30,000 ‘non-dom’ levy. In addition to this, the Treasury said it would also go on discussing ways to allow the £30,000 levy to be offset against US tax.

Taxes non-doms will now have to pay will now be judged only on UK earnings and money brought into the country.

Yvette Cooper, the chief secretary to the Treasury, said: ‘There have been some misunderstandings as a result of some of the detail of the consultation document, things that were never intended, and we’ve clarified that. We said at the outset we would consult on the detail and would consult on the draft clauses. I think that’s a good thing to do.’

George Osborne, the shadow chancellor, said the Chancellor was unfit for his job: ‘In times of economic uncertainty people need a chancellor who can demonstrate strength of leadership and consistency of judgment. With Alistair Darling, we have neither.’