Rangers defeated after seven-year battle over tax bill
RANGERS finally lost a multimillion-pound tax avoidance dispute yesterday, leaving scores of small firms out of pocket.
Judges found that ‘loans’ paid to players and staff were in fact taxable earnings, in a decision that brings to a close legal proceedings that have dragged on for years.
Talks will now start to settle funds owed to the public purse, but smaller businesses owed cash are unlikely to recoup all of their money, if any.
The so-called ‘big tax case’ centred on the use of Employee Benefit Trusts (EBTs). More than £47million was paid to players, managers and directors between 2001 and 2010 in tax-free loans.
They included Ibrox figures such as Sir David Murray, who received £6.3million, Graeme Souness, who was paid £30,000 and former captain Barry Ferguson, who received £2.5million.
The Supreme Court ruled in favour of Her Majesty’s Revenue and Customs (HMRC) that the payments were earnings and should be taxable.
Liquidator BDO said it would begin talks in an attempt to settle the £94million believed to be owed to the public purse.
The unanimous decision by five judges led by Lord Hodge means ‘unsecured’ creditors such as local suppliers and other clubs are unlikely to have their claim paid in full, if at all.
They range from ticket firm Ticketus, which says it is due £27million, to a Susan Thomson, of Bearsden, near Glasgow, who provided face painting services and is owed £40.
HMRC had lost two earlier tribunal hearings over the issue of EBT payments before a ruling was made in its favour at the Court of Session in 2015.
Yesterday’s judgment followed an appeal against that decision by BDO, acting as liquidator for RFC 2012, formerly Rangers Football Club plc. The company which ran the club entered administration in 2012.
HMRC said the ruling proved the EBT scheme was ‘contrived’ in that it presented payments as ‘loans’ rather than earnings, amounting to ‘tax avoidance’.
A number of other football clubs are also believed to have operate similar tax avoidance schemes and could now be hit with HMRC demands.
The verdict will have no direct impact on the club as it exists today. The assets, business and Scottish Football Association membership were transferred to a new company in 2012 to allow the team to continue playing as Rangers.
Former Rangers chairman Sir David said he was ‘hugely disappointed’ with the outcome.
He added: ‘The decision runs counter to the legal advice which was consistently provided to Rangers Football Club, that on the basis of the law and legal precedent at the time, the contributions made to the trust were not earnings and should not be taxed as such.’