Businessman Gerry McCaughey has said he will stand down as chairman of the Dublin Docklands Development Authority.

This came after it emerged that he took advantage of a loophole to legally reduce his tax liability when he sold his building company Century Homes in 2005. Mr McCaughey told RTE radio this was a 'perfectly legal act'.

But he said did not want the country's politicians to become distracted by an issue 'as minor as this'. Mr McCaughey also said it would be almost impossible for him to operate as effectively as he would hope as chairman of the DDDA.

He expressed concern about the timing of the news, saying there were 'sinister forces' who wanted to make sure he would not take on the DDDA role.

Mr McCaughey's Century Homes was acquired by building materials group Kingspan for €74m in 2005.

Mr McCaughey and three other shareholders were advised that they could benefit from not paying 20% capital gains tax on the transaction if their spouses lived in Italy for a year.

Under the arrangement, the shareholders would sell their shares to their wives who would then sell them to a third party, according tax advice from KPMG drawn up for the shareholders.

'We would prefer to minimise dissemination of knowledge of the matters contained in this report as Revenue attack is more likely if this route was to be copied by others,' the document said.

When contacted by RTÉ, Mr McCaughey declined to comment the specifics of the case and said his wife's tax affairs were her 'private business'.

'People do everything they can to reduce their tax liability. If there was any tax treatment it was done within the law. It would have been the best tax advice available,' he said.

However, RTÉ has independently verified that the tax arrangement did take place.