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The Welsh government has paid £19m to settle a tax bill at its environment agency, Natural Resources Wales (NRW).

It follows an investigation by HM Revenue and Customs (HMRC) into the way NRW hired specialist contractors.

Deputy First Minister Huw Irranca-Davies said the government "increased its engagement" with NRW, but the Conservatives said the organisation should be broken up.

NRW is still talking to HMRC about the final bill, which could be higher.

Plaid Cymru said the Welsh government had admitted that NRW was "struggling".

NRW's responsibilities include managing forests, responding to floods and granting environmental permits.

Its annual accounts say an HMRC investigation revealed a "potential liability" related to specialist contractors.

NRW said it paid the £19m "without any admission of liability" for unpaid income tax, National Insurance contributions or the apprenticeships levy.

The money is also meant to cover interest payments, but discussions about the final debt are continuing and a "wide range of values are possible".

The Welsh government said it would discuss how NRW can repay it when there was a final bill to HMRC.

NRW said it could provide no further details while the case continues.

In a statement it said: "We continue to discuss this matter, and the extent of the potential liability, that may be owed in order to achieve a resolution."

Irranca-Davies, the climate change secretary, said: "I have asked my officials to work with NRW to develop enhanced monitoring arrangements to provide assurance and confidence in the oversight and financial and risk management arrangements in place.

"I have also asked the chair of NRW to take a number of steps to further enhance capacity and capability within NRW."

He said the investigation was into NRW's "historic compliance with off-payroll working".

A tax rule known as IR35 says off-payroll workers should pay broadly the same income tax and National Insurance as regular employees.

HMRC said it could not comment on specific cases.

The Conservatives said NRW, formed through a merger of quangos more than 10 years ago, should be broken up.

Shadow Rural Affairs Minister James Evans said: "What concerns me now is that the organisation may face a large tax bill that will require the Labour government to once again whip out the taxpayers' cheque book to bail them out."

Plaid Cymru's Delyth Jewell said the story raised "serious concerns regarding the management of NRW", and called for “urgent clarification... in order to ascertain whether sufficient action was taken to prevent this situation from escalating".

She said Irranca-Davies' statement was an "admission that NRW are struggling".

Mark Isherwood, chair of the Senedd's public accounts and public administration committee, said he was shocked, and his committee would seek to bring both NRW and the Welsh government to speak to its members.