What is the Big Tax Case?
A legal fight over the use of Employee Benefit Trusts (EBTs). The Big Tax Case was brought against former Rangers owner Sir David Murray’s group of companies, which included what is now known as the Oldco - the Rangers corporate entity eventually liquidated in 2012 - by HMRC. It principally concerned outstanding amounts owed from the use of the EBTs to make payments to Rangers players between the tax years 2000/01 and 2009/10.
Why is it called the ‘big’ tax case?
To differentiate it from the so-called ‘wee tax case’, a separate action launched by HMRC. The wee tax case concerned outstanding amounts owed from the use of a discounted options tax scheme for payments made by the Oldco to Tore Andre Flo and Ronald De Boer between the tax years 2000/01 and 2002/03.
Why did HMRC launch the action?
HMRC argued that as much as £75,000,000, including interest and penalties, was owed by the Oldco as a result of its use of EBTs. The Murray group, including Rangers, countered that the £47.65 million of payments were loans rather than actual earnings and not subject to tax.
How does today’s ruling affect Rangers?
It is thought the Newco, now controlled by Dave King, will be unaffected, although this is still to be confirmed. The Oldco was sold by Murray in 2011 to Craig Whyte. It was subsequently liquidated in 2012 for non-payment of a separate tax bill unrelated to the Big Tax Case.
Why then does tax case still matter?
A first tier tax tribunal ruled in November 2012 that Rangers’ use of EBTs under the Sir David Murray regime was legal. At the time, former Rangers chairman Alastair Johnston claimed that the Oldco would not have gone out of business if the verdict had been known earlier. “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.” However, HRMC subsequently decided to appeal, which began the process to today’s ruling.