Lahoor Talabani, director of counter terrorism for the Kurdistan Regional Government (KRG), said up to 450 Britons were amongst the ISIL ranks and added that the West should not see the conflict as solely against the Iraqi government.
He told Sky News: "If only 10% of these people survive, if I know Abu Bakr al-Baghdadi (ISIL leader) he will use these people to attack the UK.
"According to the intelligence we have, just Britain alone has around 400 to 450 known people fighting amongst the ranks of ISIL."
Talabani insists KRG intelligence told the US and the Iraqi government in January that ISIL was planning to seize Mosul and push towards Baghdad, but they were ignored.
Iraq Kurdish Fighters Attack ISIL Near Jalula Town Kurdish fighters are asking for weapons and ammunition
And he said the Kurdish Peshmerga does not have enough weapons and ammunition to take on the insurgents over an extended period as it mounts a counter offensive in Jalula and Saadiya.
He said: "I don't see allied troops on the ground...air strikes are good but they need to do it very quickly or it will be too late."
Peshmerga commanders have described how ISIL goes to great lengths to hide the identities of its militants - including shooting dead bodies they are unable to remove from the battlefield repeatedly in the face until they are unrecognizable.
Meanwhile, it is being reported social media sites are being used to recruit would-be British terrorists.
Twitter and the anonymous social networking website ask.fm are apparently being used by extremists to pass on information about visas, as well as advice on how to avoid arousing suspicion and evading security.
It comes after Prime Minister David Cameron told the House of Commons leaving Iraq to its own affairs was not an option.
He said: "I disagree with those people who think this is nothing to do with us and if they want to have some sort of extreme Islamist regime in the middle of Iraq, that won't affect us. It will."
Around 150 Australians are also thought to be fighting with militants in Syria and Iraq, raising fears of a terrorist threat if they return home, leading to the cancellation of passports on the advice of security agencies.
The Iraqi government has said its forces have repelled repeated attacks by insurgents on the country's largest oil refinery and retaken parts of Tal Afar on the Syrian border.
Lieutenant General Qassim al Moussawi said 40 insurgents were killed in fighting at the refinery in Baiji on Wednesday.
Prime Minister Nouri al Maliki said his forces were "striking back" after a "shock" defeat at the hands of extremist militants.
The government has asked the US to carry out air strikes to help reverse gains made by ISIL.
The US military has said it has started flying manned and unmanned drones over Iraq.
BA/BA