Buyers could obtain their own tax haven, paying 20 per cent on income and avoiding death duties and capital gains, in common with other Channel Islands residents, the report said.

Neighbours would include Sir David Barclay and Sir Frederick Barclay, the billionaire owners of the Ritz Hotel and the Telegraph group who bought Brecqhou, a tiny island off Sark, in 1993 for £2.33 million.

Herm is the first Channel Island to go on sale for years. The asking price for the 40-year lease includes a manor house, 13th century chapel, 80 acres of farmland complete with a dairy herd and what is thought to be the world’s smallest jail.

Unlike Brecqhou and their nearby sister island Jethou, Herm is open to the public and has become a popular tourist destination. Under the terms of the lease, the owner must allow tourists on to the island from “sunrise to sunset”.

The current owners, Pennie and Adrian Heyworth, have run the island for 28 years.