Rangers liquidation: Financial sense at heart of HMRC stance

THE whole Rangers story has been bafflingly complex at times, and on Thursday it became more complex still, as the process of liquidation began.

Administrators Duff & Phelps sold the assets of the club – which means, above all, Ibrox and Murray Park – to Charles Green for a reported £5.5million. Those same assets have been valued at around £100m. So how, especially given Rangers’ debt to the taxpayer, could such a deal go through?

The first thing to say is that the £100m figure looks unrealistically high. Ibrox is listed, there are limits to what kind of developments could be made on the Murray Park land in Mlingavie, so it would not be a simple matter of buying the land and erecting the maximum number of houses on it.

And Duff & Phelps should have had the assets independently valued. That valuation could have told them that a more realistic worth of Rangers’ assets was far less than that £100m figure, and they could have proceeded with the sale to Green on that basis.

From the point of view of Her Majesty’s Revenue & Customs, however, a related question arises. Under Craig Whyte, Rangers ran up an estimated £13m in unpaid PAYE and VAT, plus interest. How, then, could they accept a liquidation which has left a new company in charge of the football club without any obligation to pay that debt?

The reason is that they have decided the liquidation, and the legal powers it gives them, holds out a better promise of recouping at least some of that money than Green’s original plan of a Company Voluntary Arrangement does. A CVA offering at most nine pence in the pound, and probably far less, would have repaid HMRC at most, very roughly, £1m. By rejecting it, they are now able to get insolvency firm BDO to investigate what went on at Rangers for the past several years, and may be able to claim more money back in total from some of the individuals responsible for the mess the club has found itself in.

Another factor to bear in mind is that, by allowing Green to get the club back on its feet rather than trying to close it down and force an auction of assets, HMRC can in the long term get more revenue. Jobs have been preserved – and obviously unemployment costs the government money.

And once Rangers are playing football again, and earning money, they will start to pay tax properly. It’s not an exact science, but HMRC have made a reasoned assessment of what is the best deal for the taxpayer.

Having said that, it is very hard to discern the timescale which Rangers will require to get back on their feet. At the moment, with Walter Smith having offered a counter-bid to take over the club, it looks like being a game of brinksmanship, with Smith and Green waiting to see who blinks first.

With the assets in his control Green may well think he can sit tight. But if, as is likely, a big majority of supporters back Smith by not buying season tickets while Green is in charge, that will steadily increase the pressure on the incumbent.

In any case, the club looks sure to stay in limbo until the SFA and the SPL decide its future. Rangers could be playing in the top division, the Third Division or none next season. Until they find out, they cannot be sure of their budgets.

And for their part, Duff & Phelps cannot yet be sure of getting the amount they want out of the club. Their costs will be subject to scrutiny either by the Court of Session or by a creditors’ committee – although in the latter instance a creditor dissatisfied with the outcome can still refer the matter to the court.

And it is relatively common for the court to refuse to sanction payment of a bill in full from the administrators. Last year, for example, KPMG claimed £518,000 for carrying out the administration of Glasgow jewellers Martin Groundland, but Lord Glennie reduced that sum by £77,000. Claims have to be justified.