The tax man has come under attack for turning a blind eye to more than 2,000 British expat millionaires living in luxury in Monaco while they retain close ties with the UK.
Tax law recently upheld in a series of court cases clearly states that expats are still liable to pay tax in the UK unless they have broken all ties to live overseas.
An investigation by The Times newspaper in London reveals that the 2,000 expats in Monaco include 500 directors of UK companies who run more than 1,300 businesses in Britain.
Tax experts claim these wealthy entrepreneurs have managed their finances to keep £1 billion a year in taxes they would pay if they lived in Britain.
The investigation also claims many expats in Monaco give significant contributions to political parties back home.
Residency test
They include Lord Laidlaw, 69, who donated £5 million, and David Instance, 73, who loaned a helicopter to Prime Minister David Cameron.
A spokesman for HM Revenue & Customs said: “The government wants to make sure the rules in our tax system are clear, but those on tax residence are currently complicated and uncertain.
“They have built up over time, often based on decisions in the courts, so we are bringing in a residence test that will bring certainty to the minority of people whose tax residence status is not immediately clear.”
The new residency test is likely to start from April 2013, but the final legislation has yet to meet the approval of Parliament.
Living in Monaco is expensive – even opening a bank account involves depositing nearly £250,000 as a security.
Expensive homes
Luxury properties lining the hillsides around the famous Monte Carlo harbour are among the most expensive in the world.
Businessmen living in Monaco include Sir Philip Green has an estimated fortune of over £4 billion. He reputedly has a solid gold Monopoly set, each space inscribed with the name of a shop he owns.
He pays little or no tax on his empire, because the business is registered in the name of his wife Tina Green, who lives in Monaco.
The Greens own high street fashion empire Arcadia Group, that runs brands Burton, Dorothy Perkins, Evans, Miss Selfridge, Outfit, Topshop, Topman and Wallis.
Former party treasurer Phillip Crudas also lives in Monaco.
