Only one in six of UK's richest men is paying any income tax

The super-rich are using loopholes to avoid paying £2billion a year in income tax, official figures have revealed.

Only one in six of those earning more than £10million a year is paying tax on their earnings - with the rest using loopholes to dodge the burden.

The revelation will fuel anger over the private equity tycoons who are making vast fortunes while the gap between rich and poor widens.

MPs condemned the Treasury figures as a 'national disgrace' and urged Gordon Brown to close the loopholes and help ordinary people instead.

Sir Ronald Cohen, one of Britain's richest men, has warned that rioting could erupt on the streets because of the growing divide between the haves and the have-nots.



Freedom of Information requests revealed that, of the more than 400 UK-based individuals who earn or are capable of earning more than £ 10million a year, only 65 filled in a tax return in 2004-05.

The remainder use sophisticated tax dodges to get round paying - including claiming non-resident or non-domicile status or diverting their earnings to offshore trusts.

One leading private equity tycoon has admitted that a tax break on share sales means he pays a lower rate of tax than his cleaner.

The loophole, known as taper relief, means wealthy businessmen pay as little as 10 per cent tax on the sale of shares - which is effectively their main source of income.

But the largest tax dodge is nondomicile status, which allows foreign billionaires to base themselves in Britain but pay no tax on their overseas earnings. In 2004-05, 112,000 individuals claimed non-domicile status.

British citizens can also escape tax if they spend no more than an average of 90 days a year in the country over four years.

Others slash their bills by holding their earnings in trusts in offshore tax havens such as the Channel Islands or British Virgin Islands.

A senior Tory yesterday came to the defence of the private equity bosses who were attacked by members of the Treasury select committee on Wednesday.

Trade spokesman Alan Duncan tore into the MPs on the committee for 'childish and undignified' behaviour in questioning the tycoons.

He added: 'The cocky behaviour of some of the members of the Select Committee yesterday was shameful and self-indulgent.'

But former Labour Minister Peter Kilfoyle said: 'This is a national disgrace. All power to the select committee for exposing this whole issue.

'The question is - What is the Government going to do about it? Are we going to have a new Chancellor who is going to make sure that these people are paying a fair proportion of tax like hardworking Britons have to do in any other occupation?'

TUC general secretary Brendan Barber added: 'It's time government stopped letting top earners off the hook of paying their fair share.'

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