Former senior Ukip MEP Amjad Bashir has defected to the Tories - but Nigel Farage's party said it had suspended him over "grave" allegations of impropriety.
Prime Minister David Cameron said he was "absolutely delighted" at the Yorkshire and Humber MEP's decision.
News of the defection emerged shortly after Ukip suspended the MEP, who was the party's communities spokesman, over allegations including "unanswered financial and employment questions".
Mr Bashir, a Bradford businessman, dismissed Ukip's move as a "desperate attempt" to spoil the news of his decision to join the Conservatives.
The defection news broke shortly after Ukip issued a statement saying it had suspended Mr Bashir and would be passing information from its investigation to the police.
A party source said Mr Bashir had been aware for some time that he was being investigated and suggested that the suspension was the reason for his defection.
"He knew he would be receiving that letter today," the source said.
The MEP said he met Mr Cameron yesterday and applied to join the Tories.
Mr Bashir had been informed he was facing investigations over allegations including interference with Ukip candidate selection processes and a continued affiliation with Mujeeb Bhutto, a former Ukip spokesman who resigned from the party after it emerged he had been jailed for his part in a Pakistani kidnapping gang.
Mr Farage said: "Ukip has suspended Amjad Bashir MEP pending further investigations into unanswered financial and employment questions."
A Ukip spokesman said: "The UK Independence Party has a zero-tolerance policy and takes the matters at hand extremely seriously.
"The allegations against Mr Bashir are of a grave nature and we will be forwarding our evidence obtained so far to the police.
"Ukip will not tolerate anyone abusing their positions in the party, as we have a firm commitment to differing ourselves from the existing political classes. As a result, Mr Bashir's involvement with the party was suspended today with immediate effect pending further investigations."
But Mr Bashir said: "On Friday I met David Cameron and applied to join the Conservative Party.
"It is clear Ukip's action today is a desperate attempt to spoil this and is without any foundation.
"The issues raised in my notice of suspension are historic and well-known to the party. Indeed, on one of them, Nigel Farage has publicly defended me over it."
The coup is a major boost for the Prime Minister, who has suffered the defection of two MPs to Ukip and has seen the Eurosceptic party eat into Tory support.
Mr Cameron told The Telegraph during a meeting with Mr Bashir that he understood why voters had been tempted to Ukip.
"I understand why some people have drifted away to Ukip," Mr Cameron said. "I want to genuinely win those people back by saying look, we are the only party that can offer the strong immigration control this country needs; we are the only party that can deliver that referendum that the British people deserve.
"And crucially, this general election is not a by-election, it's not a beauty contest, it is not a chance to send a message or make a statement, it is about choosing a government of the United Kingdom."
Mr Cameron said: "I'm absolutely delighted that Amjad has decided to leave Ukip and join the Conservative Party."
Mr Bashir, who is a Muslim from a Pakistani background, had an "inspiring" story, Mr Cameron said.
He added: "It's another sign that in this great country of ours you can come to Britain without very much and you can be a member of the European Parliament, an MP, sit in the Cabinet."
Mr Bashir said Ukip had become a "party of ruthless self-interest", was "pretty amateur" and had a "ridiculous" lack of policies.
He said the party - which has seen its opinion poll rating soar and topped the national poll in last year's European elections - was "delusional" about its chances of winning seats in May.
He said: "After almost three years as a party member, I realise that Ukip is more concerned with furthering its own interests as a political party than delivering for the British people.
"I've seen Ukip both at home and abroad, and I'm sorry to say they're pretty amateur. In the European Parliament, some of their MEPs think it's acceptable to shout and fool around."
He added: "They think they'll sweep up dozens of seats in May, but that's delusional. What they are in very real danger of doing, however, is making a big enough dent in the Conservative vote to let Labour in."
Labour's Jon Trickett, the shadow minister without portfolio, said: "This latest defection shows more than ever there is a revolving door between Ukip and the Tories.
"Conservative MPs defect to Ukip and Ukip MEPs flee back the other way when Nigel Farage says they have questions to answer.
"Ukip and Tories share policies as well as people - both parties want to increase NHS privatisation and cut taxes for those at the very top. All that's clear is that neither party can be trusted to stand up for hardworking families."
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