A KEY witness at Rangers’ tax tribunal over the use of Employee Benefit Trusts (EBTs) has told Scotland on Sunday he believes the club can still win the case that could otherwise land them a bill for more than £50 million from Her Majesty’s Revenue and Customs.
The source, who asked not to be named with a judgment still possibly two weeks away, called into question owner Craig Whyte’s implication of the so-called “big tax case” in the Ibrox club’s plunge into administration last week. HMRC insisted that the reason was a further £9m in unpaid tax accrued since Whyte took over the club last May.
“Until a fortnight ago, it was widely reported that Rangers’ chances of winning the tribunal were 50-50, now it is said they will lose,” the source said. “Yet nothing can have changed in that intervening period, with the tribunal ending last month [18 January]. It has been said Whyte must have got wind of the outcome ahead of the club being placed in administration, but he can’t have done so. The opinion of the judges must remain strictly confidential until they make public their decision. If Rangers won the EBT case, their future should have been secure. Now it won’t be and, in that scenario, serious questions must be asked of Whyte.”
The source says there are “myths” about how EBTs were administered when Sir David Murray owned Rangers, and that HMRC made “no headway” in convincing the three judges who will decide if these were operated in a manner that changed them from a legal tax avoidance loophole to a tax evasion scheme.
EBTs are believed to have been run by around 5,000 businesses in the UK, including football clubs south of the Border. They became illegal in December 2010 but, until then, firms had been able to exploit the tax laws to provide sums to employees without PAYE or National Insurance as long as these were in the form of discretionary, repayable loans. At the tax tribunal, HMRC argued Rangers’ use of them for nine years was, in fact, a way to help mostly foreign players evade tax on salaries and bonuses. The source, who is not connected to Rangers but had clients who benefited from EBTs, claims that this entirely misrepresents the scheme in operation at Ibrox. “It was totally and absolutely correctly administered, and the club met all their legal responsibilities and complied with all tax laws,” said the source. “They took advice from top-notch lawyers and a whole battalion of the best accountants on a global level.
“I have read a lot that isn’t true about how Rangers were supposed to have misused them. They weren’t written into the players’ contracts of employment. They were totally separate. Money in any EBTs was not a salary sacrifice. The EBTs were independently administered offshore in Guernsey. I have heard it said that players had letters stating they did not have to pay these loans back. The tax commission hammered away at that but made no headway because these letters categorically do not exist.”
The Rangers Tax Case blog, which has covered the situation exhaustively for almost two years, claimed the “smoking gun” for HMRC was a number of letters indemnifying players from any future tax liabilities on money placed in their EBTs.
The source insisted: “There is nothing unusual in that as it is always employees who set the schedule basis for tax and there was no great gain for the players.”
But the source also admitted: “The very slight weakness is that the administrators in Guernsey weren’t always as diligent in their book-keeping as they should have been. Players buggered off back to Argentina, Italy and Australia and they didn’t keep track of these movements, as was incumbent on them. This was tightened up, though, over time.”