Some of Britain's top civil servants are having part of their tax bills paid out of public funds - leaving them tens of thousands of pounds better off, it has been reported.
Government departments have been paying the taxes on perks such as official cars, first class rail travel and rent-free accommodation.
One senior Conservative MP expressed surprise at the arrangements, saying they were out of line with what could be expected in the private sector.
However, HM Revenue and Customs (HMRC) insisted that it was a frequently seen practice for employers to pay the tax bills on benefits for some employees.
According to the Daily Telegraph, officials who have benefited from the system include the Cabinet Secretary, Sir Jeremy Heywood, the head of NHS England, Sir David Nicholson, and the former head of the Serious Fraud Office, Phillippa Williamson.
It said that the effect of the deal was to increase the value of their pay packages by up to £30,000 a year.
The tax is due on benefits - like free travel or accommodation - which is regarded by the tax department as extra income.
Anyone who receives these benefits, which are in addition to their salary, is supposed to pay extra tax. In the case of these individuals, the government is picking up that part of the tax bill.
According to the newspaper, Sir Jeremy has the use of a chauffeur-driven Toyota Prius which, it said, had cost taxpayers £172,100 over the past two years.
The tax bill on the car for which Sir Jeremy was liable has been estimated at more than £49,000.
Sir David Nicholson is head of NHS England Sir David Nicholson was said have received benefits worth £320,303 over the last six years, including the cost of a rented flat in London, the use of a chauffeured car and first-class train journeys.
Phillippa Williamson has been accused of claiming expenses of more than £98,000 over three years to commute between London and her home in the Lake District.
Her tax bill on that figure was about £40,000, which, the Telegraph says, was picked up by the SFO.
Richard Bacon, a Conservative member of the Commons Public Accounts Committee, expressed concern at the arrangements.
"Most taxpayers would be surprised to find that this sort of thing is tax-free. These are out of line with what one would expect from the way people in the private sector are treated," he told the Telegraph.
"Taxpayers are already paying a lot for these people, I don't think they would be expecting to dig into their pocket to pay for the tax on the benefit as well."
HMRC said it is the choice of the employer whether it wishes to pay an employee's tax bill for any benefits they receive.
"Employers may choose to pay the tax due on the benefit. If so any such payment will constitute an additional benefit - which will also be taxable on the employee.
"This is quite a common practice by employers and is a matter between employer and employee. HMRC makes sure all the tax due is paid."
It cited 20,000 cases over the last year when employers had paid the tax bill due on employees' benefits.
A spokesman for the Department of Health, which pays the tax on benefits received by Sir David Nicholson, told the Telegraph: "Benefits in kind payments are paid to recognise [senior civil servants'] need to travel to carry out their roles."
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