MPs have expressed concern at the tax arrangements of thousands of public sector workers, including senior staff at the BBC as it emerges that many have been granted “off payroll” contracts.
Up to 25,000 BBC staff do not have to pay tax at source under their arrangements revealed by the publication of a report by the Public Accounts Committee.
It is thought that the actual number of people who work for the BBC who are paid through private companies, potentially allowing them to reduce their tax liabilities is around 3,000.
The report says many senior staff make their own arrangements to pay tax and national insurance on their salaries, which could allow them to pay too little.
Many of the BBC staff in this situation are well-known faces seen regularly on our TV screens.
Now that the news has emerged, the BBC says it is undertaking an investigation and a detailed review into their tax arrangements.
The arrangements were put in the public eye after the head of the Student Loans Company. Ed Lester had a similar arrangement that could have saved him money on his tax bill.
This led to an investigation by the Treasury that showed similar arrangements were in place for nearly 2,500 senior civil servants where PAYE tax is not being deducted at source.
The Chair of the committee, Margaret Hodge believes that tax avoidance in the public sector goes much wider than this.
She said "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 type of tax arrangements used are perfectly fine for proper freelance and self-employed people who work on different projects for different firms and contracts.
However, the public sector employees who are using “off-payroll” contracts are working exclusively for one employer on an ongoing basis. This means they should have tax and NI taken at source.
The role of HMRC is unclear at this stage apart from the fact that these type of tax regimes are not illegal and are exploiting the loopholes provided by the use of IR35.
HMRC has reduced reduced the resources allowing it to enforce legislation to eliminate tax avoidance through the use of intermediaries.