The Department of Health has apologised after documents sent to the Guardian showed that contrary to assurances given to parliament, more than 25 senior staff employed by the department are paid salaries direct to limited companies, with the likely effect of reducing their tax bills.
In some cases, the documents show the named individuals are being paid more than £250,000 a year, as well as additional expenses.
The department claimed the 25 were not civil servants, or technically even staff, although a large number have been employed by the department for many years and hold very senior positions. It said the arrangements will be subject to review by the Treasury.
One Whitehall source said: "We cannot defend these arrangements, but it may be it is very common in Whitehall and this is just the tip of an iceberg."