Lady Warsi's expenses to be investigated by watchdog
Conservative Party co-chairman Lady Warsi will be formally investigated by the Lords standards commissioner.
Baroness Warsi referred herself to the watchdog following reports she claimed accommodation allowance while staying with a friend rent-free in 2008.
She said she made "appropriate" payments equivalent to what she was paying at the time in hotel costs.
Meanwhile Scotland Yard said it had decided not to investigate the matter, passing it back to the House of Lords.
Labour had called for a criminal investigation into the Conservative peer's expenses claims.
Following an initial assessment, a spokesman for the Lords standards commissioner said he would hold a formal investigation.
The rules for expenses claims by members of the House of Lords, as set out on the Parliament website for the year 2007-08, say members living outside London can claim a maximum of £165.50 a night.
Separately, Lady Warsi has apologised after it emerged she failed to declare she and a relative, Abid Hussain, had stakes in the same firm before travelling together to Pakistan on a government trip in 2010.
The prime minister said he was "very happy" with Lady Warsi's assurances but has referred the matter to his adviser on the ministerial code.
Mr Cameron said he believed the probe was a matter of tying up "loose ends".