Nigel Farage’s rivals are gearing up for a byelection in Clacton in the months ahead, amid speculation that the standards inquiry into his £5m gift is nearing a conclusion.

Conservative sources said the party was ready to fight in Farage’s seat, although senior figures in the shadow cabinet are divided about whether it would be winnable, given Farage’s victory in a byelection over the summer.

Other parties, including the hard-right Restore Britain, are also expected to put up candidates in the seat this time, after boycotting the August poll.

Westminster is poised for a battle over the future of Reform if the sanction from the standards inquiry is a heavy one.

The process could theoretically take place before Christmas if a decision is imminent, but the timelines of previous cases suggest it is more likely to be next year – if a serious sanction is imposed.

In the cases of Margaret Ferrier, the SNP MP who broke lockdown rules, and Peter Bone, the Tory MP found to have bullied staff, it took well over six months from the conclusion of the commissioner’s report for a byelection to take place.

The investigation into Farage’s gift began after the Guardian revealed in May that the crypto-billionaire Christopher Harborne had given him £5m just before the last election in 2024.

The Reform leader has said it was a personal matter, not political, and the money did not need to be declared. The rules state that financial support related to an MP’s job needs to be registered if given in the 12 months before they enter parliament.

Under the process, if a serious breach is found, the commissioner will pass a memorandum to the standards committee of MPs and lay members.

They would then have further discussions and call a further hearing or invite evidence from the MP before deciding on a penalty. That process can take weeks. The MP also has a right of appeal to the independent expert panel, which can take a further month or more.

If parliament agrees with a penalty of more than 10 days of suspension from the House of Commons, a recall petition could be held, requiring signatures from 10% of voters in the MP’s constituency over a period of six weeks.

In the cases of Bone and Ferrier, neither contested their seats, and Conservatives are hopeful that Farage could decide not to fight. “There’s a question of whether he will stand again,” said one shadow cabinet minister.

But Reform sources insisted Farage would fight for his seat again, having won the byelection against independent candidates including Count Binface by more than 11,000 votes.

He has also recently embarked on a tour of the country, in an attempt to shore up his core support, and a reorganisation of his party HQ. This includes launching a new Reform TV channel to pump out the party’s message direct to voters, hiring a team of 12 “journalists” headed by the former GB News producer Aaron Lobo, who had been director of operations.

Farage won a majority of 8,000 at the last general election, when he beat the sitting Tory MP, Giles Watling. The Conservative had previously won the seat with a majority of more than 25,000 in 2019, when there was no Brexit party candidate in the seat.