LONDON: Only a fraction of Britain’s super-rich are paying income tax, the Standard revealed yesterday. At least 400 UK-based individuals earn, or are capable of making, £10mn a year.
But only 65 paid income tax, according to the latest figures obtained under the Freedom of Information Act. The rest use a battery of sophisticated but legal techniques to avoid paying.
It is not known exactly how much money is being lost to the taxpayer in this way but analysis by the Standard suggests it could be as much as £2bn a year.

The revelation will place more pressure on Gordon Brown to close the loopholes that have made Britain a leading tax haven. One private equity partner has admitted that tax breaks mean he pays a lower rate than his cleaner.

Treasury figures obtained by the Standard show that 65 people who filed a tax return in 2004-05 declared a taxable income of £10mn or more.

But, according to the Sunday Times Rich List, there are more than 350 people in Britain with a fortune of at least £200mn, enough to generate a return of £10mn a year through dividends, interest, rents and profits.

Furthermore, an estimated 30 City traders earn at least £10mn, as do 30 company directors, including top hedge fund managers, private equity executives and industrialists such as vacuum cleaner tycoon Sir James Dyson.

A handful of famous names, including David Beckham, Sir Elton John and Harry Potter author J K Rowling, are also regularly in the “eight-figure club”.

Liberal Democrat Treasury spokesman Lord Oakeshott said: “These devastating figures prove that the richer you are, the less tax you pay in Brown’s Britain. Gordon Brown won’t get a grip on rich men’s tax-dodging when close adviser Geoffrey Robinson used offshore trusts and Sir Ronald Cohen (who bankrolled Brown’s leadership campaign) conceals whether he is domiciled in Britain for tax purposes.”


Sir Ronald Cohen

Latest figures show that Britons earning more than £1mn a year paid a total of £4.6bn in tax in 2004-05, a tax rate of 35.9%. But it appears most of that was paid by the “poor rich” who earn just over seven figures.

The top 1,000 richest people in Britain are worth a combined £360bn, suggesting annual earnings of around £18bn. If the same average tax rate was applied to these earnings, the top 1,000 people alone would be paying £6.5bn in tax, one-and-a-half times Britain’s overseas aid budget.

Although the biggest single tax loophole, non-domicile status, is under review by the Treasury, the government under Tony Blair has been reluctant to order a clampdown for fear of damaging the City and the economy. Other loopholes have been closed only for another to open up.

The issue has split the industry, with figures such as Sir Ronald, who is worth an estimated £260mn, saying his colleagues should pay more tax and executives such as Guy Hands of Terra Firma saying they take far greater risks than other businessmen and so should enjoy the breaks.

One senior accountant involved in designing tax avoidance schemes said: “A lot of these individuals would rather keep the money and direct it towards the issues that affect them.
“They feel that if they give it to the government it will be spent on stuff that is not applicable to them or they don’t agree with.”
He said that while advice on tax avoidance costs money, anyone earning “not that far north of six figures” could benefit from it.  – London Evening Standard