I'm not so sure it's wrong. What's happening is the employer ups the salary a bit. He can do that if he wants to. Makes the PAYE calculation as normal then takes payment for whatever benefit the employee has had (Hire car, hotel etc), that's OK as well.
Where it doesn't work (shameless plug) is where the IR try to tax the benefit at 10 -15x what it costs the employer such as trivial private use of an essential business car. ;-)
DG