A government pledge in the 2012 budget to clamp down on tax avoidance through the use of personal service companies could leave public sector organisations responsible for the tax and national insurance of contract staff.
The Budget confirmed that the Treasury would, subject to consultation, require “office holders/controlling persons who are integral to the running of an organisation to have PAYE and NICs deducted at source by the organisation by which they are engaged”.
It did not say whether they would also become liable for the pension contributions to those concerned.
The companies are used by contractors who work, usually full-time, for single employers, but who are counted as self-employed.
One accountancy expert said that if such a change were to become law, it would make dealing with an individual through a personal service company less attractive to councils.
Criticism has already been aimed at the DH following revelations that Whitehall advisers whose salaries exceeded £4m collectively were being paid in this way.
Treasury chief secretary Danny Alexander began a review after it was revealed that the chief executive of the Student Loans Company was being paid through his own company rather than as an employee.