Neil Hamilton has withdrawn from the selection process to become a prospective parliamentary candidate (PPC) for Ukip in South Basildon and East Thurrock.

The former Conservative MP made the move after Channel 4 reported that it had seen a letter from Euro-sceptic party's finance committee questioning expenses claims made by Hamilton during the European Union (EU) parliamentary elections.

"We have seen the email trail and would like an explanation as to why you did not go back to those who agreed this salary and why you did not make it known that you intended to charge VAT on your salary by charging Ukip through a company for your services as this incurred Ukip in extra costs," the letter read.

"It is accepted that Ukip would have had to pay employer's National Insurance (NI) which is substantially less than VAT.

"What is wrong here, is that you failed to go back to the management committee to clear the arrangement knowing that Ukip was at all times during this campaign short of money.

"We note that you have withdrawn your claim for attendance and stay at the Doncaster Conference as you now say that it was wrongly put in due to a 'fit of pique' – whatever that means.

"We further note that you are no longer proceeding with this claim at all. We find this somewhat surprising particularly as, if the expenses can be substantiated, as set out above, there is no reason for Ukip not to pay it or for you to withdraw the claim!"

The letter emerged before hustings to become Ukip's candidate for South Basildon and East Thurrock began.

Hamilton withdrew from the selection process and alleged that there was a "dirty tricks" campaign against him.

"The dirty tricks department of Ukip is alive and kicking and in full-swing," Hamilton told the BBC.

"Only a handful of people will have known about this letter, so it will be pretty easy to point the finger of suspicion as to who, or on whose behalf, the letter was leaked."

The former Conservative MP said he backed Kerry Smith, who was later selected for the seat after being deselected as the party's PPCfor the same seat in October.