with Bermuda unless it toes the line on a tough new international approach to so-called tax havens, it was claimed yesterday.

UK Parliamentary insiders said the UK Foreign Office was set to play tough in a worldwide crackdown on "harmful tax'' jurisdictions.

One said: "The Foreign Office is not above playing dirty if it feels it has to.

"And anything which will help them get the Overseas Territories to play ball, they would be quite prepared to use.'' Britain -- on behalf of the Bermuda Government -- signed a deal with the US in 1986 which gives tax breaks to American insurance companies doing business in Bermuda. Americans holding conventions in Bermuda also get a financial spin-off -- a lucrative market for the Island.

In return, the Bermuda Government is obliged to supply the US Government and Internal Revenue Service with certain information on US companies and individuals if requested.

And Bermuda also has the right to ask the US questions about US firms and citizens on the Island -- a valuable tool in avoiding fraudsters and other financial embarrassments which could dent Bermuda's squeaky-clean image.

Premier Pamela Gordon and Finance Minister Grant Gibbons plus Civil Service back-up -- together with top government figures from the other Overseas Territories -- met Foreign Office and UK Treasury officials in London last week to discuss tax issues.

But the UK insisted that all the leaders of the Territories did not discuss the content of the meeting -- likely to be the first of several -- outside the conference chamber.

Ms Gordon could not be contacted for comment yesterday and Dr. Gibbons declined to discuss the claims.

The Royal Gazette revealed last month that Bermuda could risk being placed on a hitlist of dodgy financial jurisdictions.

The anti-tax haven drive is a three-pronged attack, led by the Organisation for Economic Cooperation and Development, which numbers the UK among its 30-odd members, and G7, which involves the world's top economic and industrial powers, which also includes the UK, as well as the US, among its membership.

Bermuda will also have to justify its tax position to the European Union, of which Britain assumes the presidency next year.

Reports setting out the Island's arguments that it is a clean player will have to be supplied to the OECD and G7 by next month.

The Premier has already said that Bermuda should not be counted alongside countries with a two-tier tax system designed to attract offshore business.

She explained the Island does not have double standards for international business and the domestic arena.

Ms Gordon added offshore business is not taxed on profits -- but neither are domestic ones and that the international sector pays existing taxes, like payroll tax and land tax, with their Island counterparts.