05/10/2012 06:10 BST | Updated 04/12/2012 10:12 GMT

BBC May Be Helping Staff Avoid Tax, Warns PAC Chairwoman Margaret Hodge

MPs have raised concerns that the BBC employs up to 25,000 people a year who do not pay tax at source.

The cross-party Public Accounts Committee (PAC) said it was "shocked" to discover how many off-payroll contracts, under which individuals must make their own tax and national insurance payments, were provided by the BBC.

According to the committee, that number includes 13,000 people who appear on television and radio - so-called on-air "talent" - and another 12,000 off-air staff. Some 3,000 are paid via private companies, potentially allowing them to limit their tax liabilities.

But the BBC insisted that actual number of people employed on this basis was far fewer than 25,000 as "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".

PAC chairwoman Margaret Hodge, a Labour MP, warned that the use of off-payroll arrangements gave rise to "suspicions of complicity in tax avoidance".

The figures emerged as part of a PAC inquiry set up after controversy over Student Loans Company boss Ed Lester's employment through a personal service company without tax being deducted.

The Treasury disclosed in May, after conducting its own review of the practice in Whitehall, that more than 2,400 staff, each earning more than £58,200 a year, were being paid directly and without PAYE deductions.

But the PAC warned that the Treasury's review of off-payroll arrangements had been "limited" because it did not cover the wider public sector like local government, the NHS or the BBC.

Hodge said the committee suspected "many individuals and employers in local government and in the health service do not pay their proper tax and national insurance contributions".

The corporation told the PAC inquiry that its off-payroll staff were "freelance workers" and that the arrangements were "a pretty standard model" in the media industry and "important to the economics of the BBC".

It is conducting a detailed review of the practice.

But, in a report published today, the PAC stressed that the BBC could not provide "any assurance" that those employed on such contracts were paying the appropriate tax.

Under new rules, announced by Chief Secretary to the Treasury Danny Alexander in May, all senior public sector staff must be on the payroll unless there are exceptional temporary circumstances.

Departments must also seek formal assurance from contractors that they are paying full income tax and national insurance.

But the PAC said it was not clear how the new rules would be implemented.

"The Treasury has not defined what constitutes the 'exceptional circumstances' under which an Accounting Officer may still approve the use of personal service companies. There is a risk that Treasury guidance may be interpreted inconsistently across the public sector and the mistakes of the Student Loans Company case could be repeated," it said.

"The Treasury has also not set out how departments should seek assurance that those using personal service companies are paying the right amount of income tax and national insurance on income they receive from the public purse."

In a statement, the BBC said: "We note the conclusions of the PAC report and will respond to the points raised as part of our detailed review of tax arrangements."

A Treasury spokeswoman said: "The BBC is wholly independent and local government pay is not controlled by central government. However the Government has raised this issue with both the BBC and the LGA and we look forward to seeing the results of the BBC's own review, which is now under way."

Matthew Sinclair, chief executive of the TaxPayers' Alliance, said: "The sheer scale of the off-payroll arrangements across government and the BBC is astonishing.

"The government must not only clamp down on these arrangements within the public sector, but also enact wholesale reform of our tax system. We need a system where individuals cannot simply have their salary paid to a private company and be taxed at a different rate."