The leader of the UK Conservatives in the European Parliament, Giles Chichester, says he made a "technical breach" of the rules on MEPs' expenses.
Mr Chichester insisted he had "acted in good faith" and would give full details of his parliamentary expenses.
He said he had been unaware of a rule change that took effect in 2003.
Mr Chichester said he had used his family firm - a publisher of maps and guides - to support his parliamentary work since he became an MEP in 1994.
He represents South West England and Gibraltar in the European Parliament.
His statement, released on Wednesday, said he had now cancelled the contract with the company. He is the son of round-the-world yachtsman Francis Chichester.
Allowances under scrutiny
He said he had received a letter 18 months ago from the "quaestors" - parliamentary funding watchdogs - "suggesting there might be a conflict of interest regarding the company".
He had replied, informing them that his arrangement complied fully with parliamentary rules.
But recent press reports on his use of MEPs' allowances had prompted him to seek clarification with the parliamentary authorities, he said.
"At this meeting I was informed that there had been a change in the rules relating to service providers, a change that took effect in 2003. This had not been brought to my attention when I renewed the contract in 2004, again registering it with the Parliament," he said.
Parliamentary rules state MEPs and any other person involved in budget matters "shall be prohibited from taking any action which may bring their own interests into conflict with those of the Communities".
MEPs' expenses have been in the spotlight since a confidential internal report on abuse of staff allowances was leaked in February.
British MEP Chris Davies, who leaked details, described the report as "dynamite". But MEPs voted to keep it secret.
The EU's anti-fraud office, Olaf, said it would look at the report after Mr Davies claimed that what he had seen amounted to "embezzlement and fraud on a massive scale" in the Ј100m a year allocated to staff costs.
(BBC)
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