By Jonathan Davies

A Labour government would scrap the 'non-dom' status which allows wealthy UK residents to limit the amount of tax they pay on money earned overseas, Ed Miliband has said.

The Labour leader claimed that non-domicile status is linked to tax avoidance and makes the UK an "offshore tax haven".

Labour says around 115,000 people would be affected by the measure but haven't said how much money it would raise. The Conservatives said that the number of non-doms "exploded" under the last Labour government.

That government had considered scrapping the status altogether, but decided to tighten rules, as did George Osborne during this government.

Ed Miliband said: "There are people who live here in Britain like you and me, work here in Britain like you and me, are permanently settled here in Britain, like you and me, but aren't required to pay taxes like you and me because they take advantage of what has become an increasingly arcane 200-year-old loophole."

'Misleading voters'

Soon after Labour made the announcement, an interview between the BBC and Labour's shadow chancellor Ed Balls in January surfaced online.

In it, Mr Balls appears to maintain the idea that 'non-dom' rules should be tightened. He then goes on to say that Britain would suffer if the status was abolished, contradicting the policy announced today.

In the video, Mr Balls says: “I think that it is important that you make sure the non-dom rules work in a fair way. I think they were too lax in the past. Both the last Labour government and this Conservative government have tightened them up.

“That is something I will continue to look at. I think if you abolish the whole status then probably it ends up costing Britain money because there will be some people who will then leave the country.”

But the party responded by accusing the Conservatives of editing the clip. In a post on his own website, Ed Balls said: “The Tories have edited my words from January in an attempt to deliberately mislead people because they can’t defend their own refusal to act on tax avoidance.

“They have dropped the part of my interview where on non-domicile rules I say: ‘I think we can be tougher and we should be and we will.’ That is exactly what we have proposed — ending a situation where people permanently living in the UK year after year can claim non-domicile status to reduce their tax bills and play by different rules to everyone else.”