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The PCG is concerned that the current media hysteria over how some civil servants are being paid may give one-person limited companies a bad name.

High profile use of PSCs

Following the Ed Lester case, where the head of the Student Loans Company was found to have been paid via his own personal service company (PSC) rather than via the PAYE system, a number of similar cases have also come to light.

Earlier today, The Guardian claimed that over 25 staff from the Department of Health are apparently being remunerated in the same way as Mr Lester.

In the current economic climate, these individuals, along with other familiar 'whipping boys', such as investment bankers, are the perfect targets for the media to illustrate how 'them' and the 'rest of us' are suffering during the downturn.

Another problem involves the inaccuracy of reporting, with many articles suggesting that limited company directors merely pay 20% corporation tax on their income - forgetting that personal tax is also payable on money drawn from the company in form of salary and dividends.

The PCG, the group which represents the interests of over 20,000 freelancers and contractors, has expressed concern over how limited companies are currently being portrayed.

Danger of a witch-hunt against limited companies

Chris Bryce, chairman of the organisation, said that the Government is quite right to investigate how its employees are being paid, and to clamp down on tax evasion where it occurs.

"It is fundamentally inaccurate to brand all one-person limited companies as employees attempting to avoid tax. The Prime Minister himself has praised freelance workers and said they make a valuable contribution to the nation's economy."

"We must ensure we do not create an orchestrated witch-hunt against the nation's smallest businesses that will damage public and private sector growth in the UK."

"One-person businesses are a legitimate model and the labour market flexibility they provide is vital to the economic recovery of this country."