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Last Updated: Friday, 24 June, 2005, 15:42 GMT 16:42 UK
Approval for CalMac tax loophole
CalMac ferry
CalMac is facing competition over ferry routes
Ferry operator Caledonian MacBrayne has been given the go-ahead to cut costs by exploiting a tax loophole.

The firm is considering transferring crews to an offshore company, saving more than 1m a year in National Insurance payments.

CalMac said it would help to defend its Clyde and Hebrides ferry routes.

The Scottish Executive has confirmed its approval of the move, but the Conservatives have objected to a state-owned company avoiding payment.

Transferring crews to an offshore company would avoid employers' National Insurance contributions.

The question is how we account for public money and it seems that the Treasury has changed direction on this very quickly
Eleanor Laing
Shadow Scottish Secretary

It could help the company compete with private operators when the executive goes ahead with plans to put ferry routes out to tender.

While it was thought that Treasury regulations ruled out the tactic for public bodies, CalMac has now been given the all-clear.

Shadow Scottish Secretary Eleanor Laing said it was illogical for the government to stop itself paying into the Treasury.

She intends to take the matter up with the Chancellor of the Exchequer.

Change of direction

Ms Laing told BBC Radio's Good Morning Scotland programme: "Of course we know how important CalMac is and how important its services are to many communities around Scotland.

"But that's not the question here, the question is how we account for public money and it seems that the Treasury has changed direction on this very quickly.

"At the very least I think we need to know more about it."

CalMac has insisted it is doing nothing wrong.

Isle of Lewis
CalMac sails to 22 Scottish islands

Spokesman Hugh MacLennan said: "We are a company limited by guarantee and we work within the law.

"We are wholly owned by Scottish ministers and would not do anything without the approval of our shareholder.

"We were given the go-ahead for this many months ago."

The executive said legislation regarding concessions for National Insurance payments was introduced by the UK Government back in October 2003.

It came as part of a package to allow British companies operating in sea waters to compete internationally and to protect jobs.

A spokesman said: "Scottish ministers welcome the Treasury's confirmation that CalMac could, if it so wished, introduce offshore crewing arrangements, which confirms Scottish ministers' own understanding of the position."

Why does CalMac feel the need to make such a controversial move at this stage?
Stephen Boyd

The Scottish Trades Union Congress (STUC) branded the current situation "entirely unacceptable".

Assistant secretary Stephen Boyd said: "The transport minister assured parliament that tendering is on hold until he visits Brussels once again to press the case that tendering isn't necessary.

"We are now treated to the grotesque spectacle of a state owned company avoiding paying tax in order that it can compete in a tendering exercise that no-one in Scotland wants.

"Why does CalMac feel the need to make such a controversial move at this stage?"

He added that the body and the CalMac trades unions would continue to campaign against the tendering process.

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