As NHS executives face investigation for being paid off payroll, an expert has said that it is the "tip of an iceberg" in the public sector amid widespread ignoring of contractor tax rules.
HMRC may investigate dozens of NHS executives after they refused to answer questions about their tax arrangements, the Telegraph reported.
The executives are paid through personal service companies (PSC), which allow workers to be paid as contractors through private companies. The workers don't pay national insurance contributions and pay corporation tax instead of income tax, potentially cutting their tax bills.
The issue of public sector workers being paid off payroll hit the headlines in 2012 after it was revealed that head of the Student Loans Company was paid through a PSC.
Now, an investigation by Monitor, the health services regulator, has found 86 senior health service officials paid off payroll who have refused to give assurances to their employers that they are paying the correct level of income tax and national insurance.
Kate Cottrell, an adviser on contractor tax, said about half of all of IR35 investigations by HMRC (to decide whether a contractor is genuinely self employed or should be taxed as an employee) are into people working in the public sector.
"The problem is that lots of contractors in public sector go to accountants and start a limited company. But there is a huge amount of ignorance about IR35," Cottrell said. "Some haven’t even heard about IR35."
She said that lots of low-paid workers in the public sector are paid through PSCs.