Rangers liquidators finally settle tax case as eye-watering EBT figure shows club could never have been saved

There is a certain irony to financial analyses concerning Rangers present and past this week.

On Tuesday, the club’s board devoted significant energies at their AGM to detail how recent impressive revenues have not provided the slush fund presumed. Little more than a day later, came the publication of the latest report from joint liquidators of the oldco Rangers, BDO. The firm tasked with acting for the creditors left hugely out of pocket when the previous incarnation of the Ibrox club went bust in June 2012. Detailed in that report, definitely, is the eye-watering extent to which this Rangers used the public purse, not revenues, as a slush fund by way of maleficence.

Rangers, under former owner David Murray, were propelled headlong towards liquidation when HMRC caught on to their misuse of an Employee Benefits Trust scheme. EBTs, as they are known, were utilised from 2001 to 2011 to avoid paying tax and national insurance on player and staff salaries funnelled through them. Following a typically protracted legal toing-and-froing, these were deemed to have breached tax legislation by a Supreme Court ruling in 2017.

Now, BDO, have finally reached agreement with HMRC on the tax denied to the Treasury coffers by Rangers. First, and principally, during the Murray era, and then after Craig Whyte bought the club from the Edinbugh-based businessman for a £1 in May 2011 and proceeded to withhold tax. A sale rushed through because Murray was then coming under severe pressure from Lloyds Bank as his empire had racked up a mountainous debt that the bank largely was on the hook for.

Liquidators of Rangers' former operating company have finally settled their tax dispute after agreeing a £56m deal with HMRC. (Photo by Craig Foy / SNS Group)

HMRC had set out the liabilities from the oldco Rangers – which now goes under the name RFC 2021 P.L.C (formerly the Rangers Football Club P.L.C, “the Company”) in Liquidation, in the BDO report – as £64.5m. This was the accumulation of a £48.8m claim from the EBT scheme, £4m from the small tax case, £10.2m from the Whyte era, and £1.2m from an inheritance claim. The small or, as it became known, ‘wee’ tax case related to another tax avoidance scheme concerning player bonuses uncovered during Whyte’s due diligence, and to which Rangers straight away admitted.

BDO have now reached a “negotiated resolution” that has resulted in a “composite settlement” of £56m for the whole HMRC claim. Or, if you prefer, almost 87% of what the tax authority sought to have lodged.

This conclusion to an interminable saga is significant since there were some bizarre moves three years ago to promote the notion that gross miscalculation by HMRC over EBTs had prevented Murray attracting a buyer beyond the dubious turnaround specialist Whyte to spare the old Rangers from liquidation. Yet, even without Whyte’s arrival on the scene and his subsequent mismanagement, Rangers would still have been left with a near £50m bill to HMRC. A liability they could never have satisfied and, as this demand hadn’t crystallised in 2011, never found an alternative buyer to step forward back then. Especially when there was an additional £18m bank debt Lloyds demanded be repaid before sanctioning any sale of the Ibrox club.

It doesn’t affect the finances of the current Rangers – under a different company structure – that creditors are in line to receive just over 14p in the pound over the car crash that the club’s finances became before they hit the wall. But these absolutes should surely end any further misguided attempts to present a scenario in which Rangers could have avoided liquidation and the need, essentially, to reform in 2012.