Chancellor George Osborne's claim to have halved a £1.7 billion EU surcharge in negotiations in Brussels last year is "not supported by the facts", a report has found.
Labour described the finding by the cross-party House of Commons Treasury Committee as "damning" and called on Mr Osborne to apologise for what the party's Treasury spokesman Chris Leslie said was a "completely false" claim.
The massive EU demand - relating to a recalculation of Britain's income dating back almost 20 years - sparked fury when it was issued last October, with Prime Minister David Cameron voicing "downright anger" and insisting he would not pay up by the December 1 deadline set by the European Commission.
Days later, Mr Osborne emerged from an Ecofin meeting with fellow EU finance ministers to declare that Britain would pay just £850 million, telling reporters: "We have halved the bill ... it's a result for Britain."
However, a new Treasury Committee report has found that Mr Osborne's claim was "not supported by the facts", and the Treasury should have known "well in advance" of the November 7 meeting that the demand would automatically be cut in half by Britain's regular EU rebate, negotiated by Margaret Thatcher in 1984.
The financial framework set out in official EU documents "does not appear to leave a great deal of room for uncertainty" that the rebate would "inevitably" apply, and that "this should have been clear to HM Treasury" as soon as it received the revised figures for gross national income (GNI) which gave rise to the surcharge.
Addressing the House of Commons days after the Ecofin meeting, the Chancellor said that it was "not clear" that the rebate would apply to the surcharge to the extent that it did - a position he maintained when giving evidence to the committee the following month.
But in the new report, the committee said it found Mr Osborne's argument "unpersuasive", adding: "The specific claim to have halved the bill through negotiation is difficult to support."
The report stated: "On the basis of the evidence the Committee has seen, it should have been unambiguously clear to the Treasury, well in advance of Ecofin on 7 November 2014, that the UK was entitled to a rebate on any additional budget contributions that could arise from the GNI revisions."
The report found that the Chancellor was right to claim victory in securing agreement last November for the UK's payment to be delayed until the following year without interest being charged.
But it added: "This delay of the UK's bill, part of a permanent change to the EU's financing rules, was a considerable achievement. By claiming a victory for having 'halved the bill' - a claim not supported by the facts - the Chancellor distracted attention from that achievement."
The committee's Conservative chairman Andrew Tyrie said: "The suggestion that the £1.7 billion bill demanded by the European Union was halved is not supported by published information.
"The terms of the UK's rebate calculation are set out in EU law. It should, therefore, have been clear that the rebate would apply.
"The Government got a good deal for the UK by securing an interest-free delay to the EU bill. But by overstating its success on the rebate, it distracted attention from this achievement."
Mr Leslie said: "This damning cross-party report exposes George Osborne's claim to have halved the EU budget surcharge to be totally untrue. He must now apologise to taxpayers for making this completely false claim.
"Too many times this Chancellor has desperately tried to use smoke and mirrors to fool the British people. He has been caught out again and his credibility is further undermined. People will now treat the false claims he makes in the coming weeks with the contempt they deserve."
A Treasury spokesman said: "The deal the Chancellor secured on the surcharge was not a technical clarification, it was a hard fought negotiation that halved the payment and delivered a real result for Britain.
"We note that the Treasury committee did not raise the possibility of the rebate applying at any point before the result of the negotiation was announced."