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Reform MP James McMurdock has suspended himself from the party.
In a statement, Reform chief whip Lee Anderson said it is over allegations around his business affairs published in a national newspaper. Mr McMurdock has denied any wrongdoing.
The statement said: "I have today received a call from James McMurdock who has advised me, as Chief Whip, that he has removed the party whip from himself pending the outcome of an investigation into allegations that are likely to be published by a national newspaper. "The allegations relate to business propriety during the pandemic and before he became an MP.
"At Reform UK we take these matters very seriously and James has agreed to cooperate in full with any investigation. "We will not be commenting further at this moment." A Sunday Times article claims that companies he owned received a total of £70,000 from the government's Covid Bounce Back loan scheme despite being effectively dormant.
One had no employees and negligible assets but borrowed £50,000, the paper reports. That meant it should have had a turnover of £200,000.
Another was dormant until January 31, 2020. Over the following year, it borrowed £20,000, which would have required turnover of £100,000 under the Bounce Back scheme.
Neither filed accounts or corporate filings after the loans, which the paper says is a violation of the Companies Act. In his own statement Mr McMurdock said he had told a journalist working on the story that "all my business dealings had always been conducted fully within the law and in compliance with all regulations".
The MP wrote in a post on X that he had asked for the whip to be suspended as a "precautionary measure" and "for the protection of Reform UK". Mr McMurdock joined Reform UK in 2024 after having worked in the banking sector.
In last year's general election, he was elected as the MP for South Basildon and East Thurrock. He beat Labour by a whisker, winning by 98 votes, taking the seat from the Conservatives.
It marks the latest incident of a Reform MP having the party whip removed. Rupert Lowe was suspended in March over alleged threats of physical violence towards the party's then chairman Zia Yusuf.
The allegations were then referred to the Metropolitan Police, who later said Mr Lowe would not be charged. The MP for Great Yarmouth has always denied wrongdoing and claimed he was the victim of a witch hunt after speaking out against party leader Nigel Farage in the media..