HM Revenue and Customs (HMRC) has insisted that the tax benefits enjoyed by top civil servants were past of a scheme that is "quite a common practice by employers".
Responding to the Daily Telegraph's report, the department said:
We can't discuss individual cases. However, cars provided by an employer that are available for employee use are a benefit in kind for the employee and are taxable. These rules have been in place for 37 years.
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.
Some of Britain's top civil servants are enjoying an effective pay boost of up to £30,000 a year by having part of their tax bills paid out of public funds, The Daily Telegraph has reported.
The newspaper said Government departments were paying the taxes on perks such as official cars, first class rail travel and rent-free accommodation.
HM Revenue and Customs (HMRC) said the rules have been in place since the 1970s and insisted taxpayers do not lose out.
The report said those benefiting from the system included 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.