Oldco Rangers ‘Big Tax Case’ win over HMRC

Picture: SNS
Picture: SNS
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THE former Rangers Football Club has won a huge victory in its battle with Her Majesty’s Revenue & Customs (HMRC) after a tribunal ruled that payments made to players and staff in a controversial tax scheme were not illegal.

Rangers had argued that the £47.65 million of payments were loans rather than actual earnings and not subject to tax. While the threat of a crippling tax bill engulfed the club in uncertainty, Rangers went into administration.

Now the three-person tribunal which heard Rangers’ appeal over its use of Employee Benefit Trusts (EBTs), in what became known as the “big tax case” to set it apart from a smaller dispute between the same parties, has concluded that the payments, made between 2001 and 2010, were indeed loans, which can be repaid.

The decision of the first-tier tribunal was not unanimous, with one member dissenting from the verdict. HMRC is now considering an appeal.

Last night, former Rangers chairman Alastair Johnston claimed that the club would not have gone out of business if the verdict had been known earlier.

The club’s assets were bought in June and a new company was formed, with the new Rangers team gaining entry to the bottom tier of the Scottish senior leagues.

“We would not have gone through the administration and liquidation process, for sure,” said Mr Johnston. “If you wind the clock back to the alternatives that the bank [Lloyds] and Murray Holdings had with respect to alternatives, the big hang-up was the contingent liability with this massive tax liability hanging over our heads.”

Sir David Murray’s company, Murray International Holdings (MIH), owner of the Ibrox club at the time of the disputed payments, welcomed the verdict as vindication of its stance.

The tribunal ruled that HMRC’s assessment that Rangers’ obligations should be “reduced substantially”, with only some payments subject to tax.

Sir David sold Rangers to Craig Whyte for £1 in May 2011. Rangers’ value had severely diminished due to its potential liabilities. Eight months after Mr Whyte bought the club, he placed Rangers in administration after running up PAYE and VAT debts to HMRC amounting to £9m. The club was officially placed in liquidation at the Court of Session in Edinburgh in October.

A spokesman for MIH last night revealed it has instructed lawyers to examine leaks of confidential information while the tax tribunal’s verdict was awaited. A statement from MIH said: “We are pleased with the judgment which leaves minimal tax liability and overwhelmingly supports the views collectively and consistently held by our advisers, legal counsel and MIH itself.

“While MIH has at all times respected the privacy of the tax tribunal proceedings, a substantial quantity of confidential information relating to the case has become available for public consumption, stimulating considerable discussion and often ill-informed debate.

“This has been wholly inappropriate and outwith the fundamental principles of natural justice.

“We therefore formally request that the relevant authorities investigate how these sensitive details have been released so widely.

“We have instructed our lawyers to retrospectively review online and printed publications relating to the case to identify whether legal redress is either appropriate or necessary.”

HMRC responded to the verdict last night by saying: “We are disappointed that we have lost this stage of the court process and we are considering an appeal.

“The decision was not unanimous and the diligence of HMRC investigators was acknowledged by the whole tribunal.”

The case reached appeal after Rangers was found by HMRC to have breached tax rules through the use of EBTs. The club’s appeal was heard over 29 days, concluding in January. A statement issued on behalf of the tribunal said the panel regretted the delay in releasing its findings.

Although the tribunal could not reach a majority view, two of the three sitting judges, Kenneth Mure QC and Scott Rae, agreed “in principle” that “controversial monies” received by players and staff were not paid as “absolute entitlement”.

A third judge, Dr Heidi Poon, reached the verdict that the money received by employees through the trust represented earnings, liable for income tax.

A tribunal statement said: “At a late stage in its deliberations it became clear that the tribunal would be unable to issue a unanimous decision. It is conscious of and regrets the consequent delay.

“The majority view reflects the argument that the controversial monies received by the employees were not paid to them as their absolute entitlement. The legal effect of the trust/loan structure is sufficient to preclude this. Thus the payments are loans, not earnings, and so are recoverable from the employee or his estate.”

Attention will now turn to a Scottish Premier League investigation into alleged undisclosed payments to players. If found guilty, Rangers could be stripped of honours won during any period of wrongdoing.