The Public Accounts Committee has stated that too many public sector workers are making their own arrangements to pay tax and national insurance, which allows them to contribute less.

An initial Treasury Review followed on from the emergence of details of how the former Chief executive of the Student Loans Company, Ed Lester, was being paid via a personal service company, which potentially saved him £40,000 in tax.

The investigation revealed that for more than 2,400 civil servants, tax was not being deducted when their wages were paid, through PAYE. However, it has been suggested that the Treasury Review was limited in scope to central Government and did not cover other public services, like Local Government and the NHS.

Margaret Hodge, Public Accounts Committee Chairman, commented on these findings:

“It was shocking to find out that no fewer than 2,400 central government appointees were benefiting from off payroll arrangements.

“Furthermore, the Treasury Review only covered civil servants. Tax avoidance in the public sector goes much wider.”

She added:

“The public sector must maintain the highest standards of propriety in its employment practices if it is to show leadership in the fight against tax avoidance.

“It must avoid the practice of using off-payroll arrangements for staff – which generates suspicions of complicity in tax avoidance and which fails to meet the standards expected of public officials.

“Those whose income is derived from monies raised through taxation have a particular obligation to make sure that they do not use tax avoidance schemes.”

The Committee announced it was ‘shocked’ to discover that the BBC allegedly has 25,000 staff on “off-payroll” contracts, although the BBC has said that many of these were short-term contracts and that is was in the process of reviewing these current tax arrangements.

Director of Tax Policy at the Chartered Institute of Taxation, John Whiting, issued comments on when it is acceptable for some workers to make their own tax arrangements, saying:

“If you are just an ordinary freelancer, which is very prevalent these days – anyone from a plumber to journalist – working here and there, working through a company, then it is a perfectly sensible way of organising your affairs.”

However commenting on the discrepancies that this report is hinting at, Whiting said:

“What this report is targeting are people who are in what is often termed as ‘disguised employment’ – they’re really an employee but they are putting the aura on them of ‘No, I’m operating for a company’.”

This, he said, was the charge being made against some BBC staff and some public sector workers.

The BBC has responded to the revelations of the report, stating:

“In many cases an individual – such as an occasional contributor to programmes – could be issued with a contract each time he or she is booked to appear.

“We note the conclusions of the PAC report and will respond to the points raised as part of our detailed review of tax arrangements.”