Whitehall staff paid via limited companies to 'avoid tax'

More than 25 senior contractors at the Department of Health (DoH) had their salaries paid via limited companies - a practice which reduces their tax bill.

According to internal documents leaked to the Guardian, the staff earned almost £4.2 million in one year while working with the department. Because these payments were made through limited companies, such as business and management consultancies, they would benefit from reduced income tax and National Insurance Contributions as they would be taxed at the corporation tax rate of 21%.

A DoH spokeswoman moved to clarify any confusion over the way in which it pays its staff, after health minister Simon Burns claimed that no Whitehall health employees were paid in this way. She claimed that the term 'staff' only referred to civil servants and not any contractors working at the DoH.

She said: "We would be happy to clarify the situation in greater detail with anyone who asks and apologise for any misunderstanding involved. We are currently carrying out a full audit of such arrangements in line with the recently announced Treasury review of tax arrangements of public sector appointments."