DCSIMG

Rangers: Ten-point deduction is likely to be thin end of the wedge for club on brink

  • by ANDREW SMITH
 

WHAT can be stated with certainty about the latest turn of events surrounding Rangers is that yesterday was the date the Ibrox club surrendered any hopes of the 2011-12 Scottish Premier League championship and a four-in-a-row run of titles.

Of course, the Ibrox club were at pains to stress that their “notice of intent” to appoint an administrator didn’t mean they were definitely going into administration. In a revealing Q&A on the club’s website, it was explained that the process gives Rangers five days to see if they could yet strike a deal with HMRC over the potential liabilities arising from their tax tribunal. A decision from that is expected in the next fortnight, with a statement from owner Craig Whyte revealing the club could be landed with a bill for substantially more than the oft-quoted £49 million figure.

HMRC has made it clear in the past that it is not interested in “plea bargaining”. It is effectively HMRC policy not to budge from seeking full payment in dealing with football clubs, even if a hardline stance might mean recovering none of the sum due. Rangers, then, are going into administration this week and will be docked a ten-point penalty by the SPL – the rules setting out this sanction for an “insolvency event” are pretty clear – to leave them 14 points behind a rampant Celtic with 12 games to play.

And that is likely to be the thin edge of the wedge for a club brought to the brink of ruin by former owner David Murray’s ego-driven need to outperform his ancient adversaries. In the early 2000s, he attempted that by paying players through tax avoidance employee benefit trusts (EBTs).

It now seems that the club administered these schemes in such a manner as to make Rangers guilty of tax evasion for ten years. And that the EBTs will effectively mean the end for Rangers Football Club as was constituted in 1873.

For there is precious little in what Whyte had to say yesterday, or was made public in the name of the club, that suggests Rangers see any outcome to their tax tribunal other than HMRC hitting them with a demand which could be as much as £75m.

That is what should lead to Armageddon time at Ibrox. Whyte said that over the next month he will seek to agree with the club’s creditors a Company Voluntary Arrangement (CVA), required to come out of administration in a manner to satisfy football authorities. That time-frame is important, as Whyte acknowledges, because for Rangers to play in Europe next season they must satisfy the SFA, as of 31 March, that they meet the criteria to be awarded a club licence, which they would not pass if in administration.

The real issue for Rangers is a CVA can only be obtained if supportive creditors cover 75 per cent of Rangers liabilities, and vote to accept a pence-in-the-pound settlement. HMRC won’t do that, and they seem set be owed more than anyone else. That would make liquidation an inevitability. In that event, the first duty of the administrator is to the preferred creditor. Whyte became the preferred creditor when he bought Rangers’ bank debt of around £20m from Lloyd’s last March. In reality, then, Whyte would accept the assets in lieu of his money and the rest of the creditors would be stuffed. A new “phoenix” Rangers would be created, perhaps going under the name “Glasgow Rangers” as this is not incorporated in their official name, and the headaches would begin for the rest of Scottish football.

It is a decision of the six-strong SPL board “on which basis the transfer of a league share” is allowed. By rights, a new Rangers should apply for SFA and SFL membership and join the Third Division. Celtic, from the noises made by chief executive Peter Lawwell would push for an outcome that would retain the SPL’s sporting integrity. However, with television deals and sponsorship contracts sold on the basis of a playing top-flight rivalry between the country’s big two, it is doubtful if the board, as a whole, would risk destabilising the finances of the entire SPL.

It is expected that a three-year points penalty, in the region of 15 points per season, would be pushed for, both in terms of a fairness rebalancing and a deterrent of sorts to others. The three-year period would also be in line with the probability a new Rangers would not be allowed to play European football for three years.

Rangers might not just be in the process of running themselves down – they may be taking Scotland’s top flight, and the country’s footballing reputation, with them.

 
 
 

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