HM Revenue and Customs chief executive Lin Homer told the Public Accounts Committee that investigations into the practice, which sees staff paid through personal service company contracts without tax or national insurance deductions, had fallen from more than 1,000 in 2002-03, shortly after new arrangements to tackle the practice were put in place, to just 23 in 2010-11.
“When this approach started there was a very significant amount of work to drive home that we would pursue this, one way or the other” she said.
But, she added: “I don’t think we have done enough on compliance and we are building up our teams and we are going to do more. We already have plans to increase them tenfold (this year).
“But we also have to look at the big employers and do work with them to make a stand on behalf of government to get better standards in bulk in places where these arrangements are being used.”
Treasury permanent secretary Sir Nicholas MacPherson told MPs: “It’s a long-standing principle that the public sector should not indulge in tax planning. This has been a very strong wake-up call that the days of tax planning in the public sector are over.
“I would like to have far fewer HMRC people working on public sector cases because the public sector should get a grip and ensure this doesn’t happen. We are going to review the data in a year’s time and if there are still lots of outstanding cases then all of us need to return to the drawing board and introduce more stringent controls.”