THOUSANDS of Scottish hospital and teaching staff have become embroiled in an offshore tax scam, it has emerged.
Schools and hospitals who hire supply staff through a number of firms based in the Channel Isles have been implicated in the controversy, with Danny Alexander, Chief Secretary to the Treasury, vowing today to crack down on the tax anomalies.
The Liberal Democrat will warn the move is costing the UK more than £100 million a year and could leave workers without crucial protections.
More than 100,000 employees across the UK are being paid through offshore intermediaries – as a way of paying less National Insurance.
Mr Alexander will announce the Treasury will crack down on the scam, as well as other tax-avoidance schemes, in next week's Budget.
It follows outrage last year when it emerged large multinational companies such as Amazon and Starbucks were paying only minimal amounts of tax in the UK.
The latest tax arrangements to come under the spotlight include organisations based in tax havens such as Jersey and Guernsey. These companies provide staff for organisations, including supply teachers for schools and workers for hospitals across the UK.
Because they are based offshore they can get around normal systems for paying National Insurance.
A Treasury source said: "Often the employers and employees do not know this is happening, but the middle-man knows. Workers could lose out on maternity pay or statutory sick pay because these companies have not paid enough."
The scam emerged after a worker approached Mr Alexander at Inverness Airport. Mr Alexander will tell the Scottish LibDem conference in Dundee today that the last Labour government was asleep at the wheel on the issue.
"Gordon Brown's boys sat idly by as companies dreamt up ever more elaborate ways of engaging in rampant tax avoidance," he will say. "This Government will not make the same mistakes as Labour. Where the 'two Eds' turned a blind eye, we are shining a light into the murky world of tax avoidance."
He will add: "So when a man came up to me at Inverness Airport a few months ago and told me he was now being paid through an intermediary rather than direct by his British employer so it could avoid paying its fair share of employers' National Insurance, I went back to the Treasury to investigate. It turns out that he's not alone."
Under Labour's tax rules, he will claim, more than 100,000 workers are being employed through offshore payroll agents. "So I can announce today, that in the Budget we will introduce new powers to clamp down on companies who avoid tax by putting their payrolls in tax havens.
"Our message is clear. British firms employing British workers must pay British taxes.
"This is just one part of a bigger package that we will announce at the Budget next week.
"The Liberal Democrats in Government are putting an end to the kind of tax avoidance that flourished under Labour.
"Everyone must pay their fair share. Everyone must pay what they owe."
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