Re: So are they breaking the law or not?
People just don't get that those with moderate to deep pockets will run rings around tax laws, and that tax laws are made deliberately complex to permit this. I don't know about the UK, but here in the US the mere definition of "income" gets incredibly technical when you start dealing with tax attorneys.
In representative governments, income taxes will always primarily fall on those at the middle of the income bell curve - those at the low end don't have money anyway (well, they do get nailed with regressive VATs / sales taxes and with monetary inflation), and those at the high end aren't going to have their feathers ruffled too hard because that's where campaign contributions and large piles of graft originate. This will not change any time soon, because politicians enjoy graft - why else take a ridiculously underpaying (compared to similar management positions) crap job that you have to spend piles of time and money reapplying for every few years?