Parliament's sleaze watchdog ruled that Sir Nicholas and Lady Ann Winterton "unequivocally" broke the rules by channelling expenses cash to a family trust over the past two years.

The arrangement - designed to avoid inheritance tax - had also "arguably" breached Commons regulations since 2003, according to the Standards and Privileges Committee.

However, despite ignoring warnings from officials 16 months ago, the couple can keep claiming back rent on the £700,000 London property for a period of grace until September.

The Wintertons bought the flat in the early 1990s, and subsequently paid off the mortgage. In February 2002 they gifted the property to a family trust in order to sidestep death duties.

Since then the long-serving MPs have occupied it as tenants, and paid the trust market rent - currently £21,600 a year - using their Commons second home allowances.

The family is estimated to have received more than £120,000 in rent from the taxpayer, and could save hundreds of thousands of pounds in inheritance tax.

The Committee branded the system "unusual", and criticised the Wintertons for assuming existing arrangements would not be affected by the tightening of Parliamentary rules in 2003 and July 2006. The changes made it clear that MPs could not use second home allowance to pay themselves.

In their response to the Committee, Lady Ann and Sir Nicholas - the MPs for Congleton and Macclesfield respectively - complained of "unfair" treatment.

They insisted Standards Commissioner John Lyon, who gathered evidence for the report, had placed "disproportionate" blame on them rather than the Commons authorities.