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Rangers tax case: HMRC blamed for downfall of club
exclusive
Greig Cameron

November 14 2019, 12:01am, The Times
Rangers went into administration in 2012 over a failure to pay tax under Craig Whyte’s regime
Rangers went into administration in 2012 over a failure to pay tax under Craig Whyte’s regime
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A multimillion-pound blunder by the tax authorities is being blamed for the financial implosion that wrecked Rangers Football Club and sent shockwaves through the sporting world.

Up to £50 million is set to be wiped off the tax bill owed by the Ibrox club’s old operating company after HM Revenue & Customs acknowledged it had claimed for too much, The Times can reveal.

Accountancy sources now believe the outstanding bill for using an offshore trust to pay Rangers players and staff is likely to stand at the far more affordable figure of £20 million. That is equivalent to £2 million annually for the 2001 to 2010 period the tax avoidance scheme was in place.

John McClelland, the former Rangers chairman, says that ambiguity over the tax burden repelled genuine investors and paved the way for Rangers’ collapse under the controversial businessman Craig Whyte. Mr McClelland said that if a £20 million tax bill had been agreed during his tenure it would have been relatively simple for the Ibrox club to find a credible buyer.
John McClelland said that he might have found more buyers had the tax burden not been so large
John McClelland said that he might have found more buyers had the tax burden not been so large
Stuart Wallace for The Times

“At the time of the sale of the club in 2011, had the tax claim been at the level now being reported then, in my opinion, the outcome would have been different,” he said. “I believe there would certainly have been a much higher level of interest in acquiring it and therefore more potential buyers.”

In one of the most turbulent moments in Scottish football history, Rangers went into administration over a failure to pay tax under Mr Whyte’s regime. HMRC, the largest creditor, voted against a rescue proposal and the Rangers operating company was put into liquidation.

Rangers used employee benefit trusts (EBT) to pay staff and players — including key figures such as Barry Ferguson and Lorenzo Amoruso — as part of their remuneration, which was not subject to tax or national insurance. Dozens of players and officials at Ibrox, including the former owner Sir David Murray, had used the scheme as they had been advised it was a legal way to avoid paying tax.

The unknown quantity of the EBT liability was also cited by Sir David as having made it very difficult to sell Rangers.

Sources from the football world indicate that there was serious interest from a number of buyers between 2006 and 2011.

Selling key players would have been one option open to the Ibrox management to meet the liability.

HMRC has been challenged on its methodology for some elements of its claims against “oldco” Rangers and a £24 million penalty charge has been wiped out. A further £2 million has also gone after certain parts were agreed to have been overstated and there may be a further reduction in the pipeline.

The tax authorities had pursued the main EBT liability as a gross figure rather than just for the tax that should have been paid on it. It is thought that if HMRC was to just look at a net figure sum for the EBT liability, then the final bill would drop to closer to £20 million.
Craig Whyte paid £1 to Sir David Murray for a majority stake in Rangers
Craig Whyte paid £1 to Sir David Murray for a majority stake in Rangers
Mark Runnacles/PA

HMRC is understood to have been unable to find evidence of fraudulent or negligent behaviour when tax returns were filed so could not pursue the £24 million penalty charge.

It is thought that individuals, such as former players and staff, have been sent similar letters wiping out any penalties that may have been due.

One accountant, who declined to be named and was not involved in the Rangers case, said that the tax authorities had had to drop penalties in thousands of EBT cases.

He said: “The Revenue might present that as them being benevolent but in fact there is no legal basis for them to get those penalties.”

The changes in the tax liability have no direct impact on Rangers International Football Club, the current operating company of Rangers Football Club.

Craig Whyte paid a token £1 to Sir David Murray to acquire a majority stake in Rangers, although he also paid off the £18 million owed to Lloyds Banking Group. It later emerged that he had paid the bank debt by effectively mortgaging future season ticket income.

Mr Whyte’s tenure ended with Rangers in administration as millions of pounds of PAYE and VAT had not been paid to HMRC.

Scottish international players such as Allan McGregor, Steven Naismith, and Steven Whittaker were among those who left for nothing following the administration and the club was subsequently demoted to the third division, or fourth tier.

Other international stars such as Maurice Edu, Alejandro Bedoya, Kyle Lafferty and Steven Davis also left, along with highly rated young players such as John Fleck, Gregg Wylde and Jamie Ness.

Sir David Murray declined to comment.

An HMRC spokesman said: “We don’t comment on identifiable businesses. HMRC has always been clear that disguised remuneration is a form of tax avoidance.”

Q&A

What is an employee benefit trust (EBT)?
It was a scheme to avoid paying tax. An employer would deposit money in a trust, which could then be distributed to beneficiaries of the trust in the form of tax-free loans.

What was the problem?
HMRC felt these schemes were actually operating as “disguised remuneration” and so should have been liable to income tax and national insurance.

How and why did Rangers use EBTs?
Between 2001 and 2010 about £47 million was paid into several sub-trusts for players and officials as well as key members of Sir David Murray’s business empire. Sir David has said it allowed Rangers to attract players they would otherwise have found difficult to afford.

Did other companies and football clubs use them?
It is thought more than 40 football clubs in England used EBTs between 1999 and 2010. Celtic used one, for signing the Brazilian player Juninho. Other companies used them for differing reasons — as a way to help employees buy shares in the business or in some cases to reduce the tax payments on bonuses.

How much did HMRC want from Rangers for using EBTs?
HMRC lodged a claim with BDO, the liquidator of the Rangers oldco, RFC 2012, for £94 million, with more than £74 million relating to liabilities, interest and penalties on debts. The remainder is made up of PAYE and national insurance not paid under Craig Whyte’s ownership and a separate tax case.

What has happened now?
HMRC has dropped the £24 million penalty claim on the EBT and there is an appeal over the value of the £36.6 million principal sum. If that appeal is successful, it is believed the latter figure would be reduced to closer to £20 million. It is thought likely that the £12 million interest claim will eventually be reduced by a substantial amount.

 

Edited by Guest
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57 minutes ago, Mr Magnificent said:

So, it was all fake news then! 

I wouldn't say 'Fake News' because at the time the figures banded about were seen as genuine. More like it has been an immense ,catastrophic and damaging error by HMRC. Actually I'm not in the least surprised....when you consider the numerous errors made by HMRC against small businesses and individuals who pay income tax via Self Assessment (or even PAYE) by overcharging what is actually due.

8 hours ago, Makdee said:

This is going to be interesting  over billed the club by a minimum of 50 million I believe 

80F7E484-B87A-40F5-AC78-8AECD6572E73.png

 

7 hours ago, Hairy Scot said:

Rangers tax case: HMRC blamed for downfall of club
exclusive
Greig Cameron

November 14 2019, 12:01am, The Times
Rangers went into administration in 2012 over a failure to pay tax under Craig Whyte’s regime
Rangers went into administration in 2012 over a failure to pay tax under Craig Whyte’s regime
SNS Group
Share
Save

A multimillion-pound blunder by the tax authorities is being blamed for the financial implosion that wrecked Rangers Football Club and sent shockwaves through the sporting world.

Up to £50 million is set to be wiped off the tax bill owed by the Ibrox club’s old operating company after HM Revenue & Customs acknowledged it had claimed for too much, The Times can reveal.

Accountancy sources now believe the outstanding bill for using an offshore trust to pay Rangers players and staff is likely to stand at the far more affordable figure of £20 million. That is equivalent to £2 million annually for the 2001 to 2010 period the tax avoidance scheme was in place.

John McClelland, the former Rangers chairman, says that ambiguity over the tax burden repelled genuine investors and paved the way for Rangers’ collapse under the controversial businessman Craig Whyte. Mr McClelland said that if a £20 million tax bill had been agreed during his tenure it would have been relatively simple for the Ibrox club to find a credible buyer.
John McClelland said that he might have found more buyers had the tax burden not been so large
John McClelland said that he might have found more buyers had the tax burden not been so large
Stuart Wallace for The Times

“At the time of the sale of the club in 2011, had the tax claim been at the level now being reported then, in my opinion, the outcome would have been different,” he said. “I believe there would certainly have been a much higher level of interest in acquiring it and therefore more potential buyers.”

In one of the most turbulent moments in Scottish football history, Rangers went into administration over a failure to pay tax under Mr Whyte’s regime. HMRC, the largest creditor, voted against a rescue proposal and the Rangers operating company was put into liquidation.

Rangers used employee benefit trusts (EBT) to pay staff and players — including key figures such as Barry Ferguson and Lorenzo Amoruso — as part of their remuneration, which was not subject to tax or national insurance. Dozens of players and officials at Ibrox, including the former owner Sir David Murray, had used the scheme as they had been advised it was a legal way to avoid paying tax.

The unknown quantity of the EBT liability was also cited by Sir David as having made it very difficult to sell Rangers.

Sources from the football world indicate that there was serious interest from a number of buyers between 2006 and 2011.

Selling key players would have been one option open to the Ibrox management to meet the liability.

HMRC has been challenged on its methodology for some elements of its claims against “oldco” Rangers and a £24 million penalty charge has been wiped out. A further £2 million has also gone after certain parts were agreed to have been overstated and there may be a further reduction in the pipeline.

The tax authorities had pursued the main EBT liability as a gross figure rather than just for the tax that should have been paid on it. It is thought that if HMRC was to just look at a net figure sum for the EBT liability, then the final bill would drop to closer to £20 million.
Craig Whyte paid £1 to Sir David Murray for a majority stake in Rangers
Craig Whyte paid £1 to Sir David Murray for a majority stake in Rangers
Mark Runnacles/PA

HMRC is understood to have been unable to find evidence of fraudulent or negligent behaviour when tax returns were filed so could not pursue the £24 million penalty charge.

It is thought that individuals, such as former players and staff, have been sent similar letters wiping out any penalties that may have been due.

One accountant, who declined to be named and was not involved in the Rangers case, said that the tax authorities had had to drop penalties in thousands of EBT cases.

He said: “The Revenue might present that as them being benevolent but in fact there is no legal basis for them to get those penalties.”

The changes in the tax liability have no direct impact on Rangers International Football Club, the current operating company of Rangers Football Club.

Craig Whyte paid a token £1 to Sir David Murray to acquire a majority stake in Rangers, although he also paid off the £18 million owed to Lloyds Banking Group. It later emerged that he had paid the bank debt by effectively mortgaging future season ticket income.

Mr Whyte’s tenure ended with Rangers in administration as millions of pounds of PAYE and VAT had not been paid to HMRC.

Scottish international players such as Allan McGregor, Steven Naismith, and Steven Whittaker were among those who left for nothing following the administration and the club was subsequently demoted to the third division, or fourth tier.

Other international stars such as Maurice Edu, Alejandro Bedoya, Kyle Lafferty and Steven Davis also left, along with highly rated young players such as John Fleck, Gregg Wylde and Jamie Ness.

Sir David Murray declined to comment.

An HMRC spokesman said: “We don’t comment on identifiable businesses. HMRC has always been clear that disguised remuneration is a form of tax avoidance.”

Q&A

What is an employee benefit trust (EBT)?
It was a scheme to avoid paying tax. An employer would deposit money in a trust, which could then be distributed to beneficiaries of the trust in the form of tax-free loans.

What was the problem?
HMRC felt these schemes were actually operating as “disguised remuneration” and so should have been liable to income tax and national insurance.

How and why did Rangers use EBTs?
Between 2001 and 2010 about £47 million was paid into several sub-trusts for players and officials as well as key members of Sir David Murray’s business empire. Sir David has said it allowed Rangers to attract players they would otherwise have found difficult to afford.

Did other companies and football clubs use them?
It is thought more than 40 football clubs in England used EBTs between 1999 and 2010. Celtic used one, for signing the Brazilian player Juninho. Other companies used them for differing reasons — as a way to help employees buy shares in the business or in some cases to reduce the tax payments on bonuses.

How much did HMRC want from Rangers for using EBTs?
HMRC lodged a claim with BDO, the liquidator of the Rangers oldco, RFC 2012, for £94 million, with more than £74 million relating to liabilities, interest and penalties on debts. The remainder is made up of PAYE and national insurance not paid under Craig Whyte’s ownership and a separate tax case.

What has happened now?
HMRC has dropped the £24 million penalty claim on the EBT and there is an appeal over the value of the £36.6 million principal sum. If that appeal is successful, it is believed the latter figure would be reduced to closer to £20 million. It is thought likely that the £12 million interest claim will eventually be reduced by a substantial amount.

 

Did I miss something ? Couldn't see anything to indicate as to how this negligence came about....any ideas lads ?

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18 minutes ago, Harold said:

I wouldn't say 'Fake News' because at the time the figures banded about were seen as genuine. More like it has been an immense ,catastrophic and damaging error by HMRC. Actually I'm not in the least surprised....when you consider the numerous errors made by HMRC against small businesses and individuals who pay income tax via Self Assessment (or even PAYE) by overcharging what is actually due.

 

Did I miss something ? Couldn't see anything to indicate as to how this negligence came about....any ideas lads ?

Sorry for taking up so much space, but I know that The Times requires one to subscribe to read articles, so I thought I'd give you guys a freebie.:mischievous-grin-smiley-emoticon:

As to the facts behind the case; many suspected that HMRC played more than just a peripheral part in the events of 2012.
Will the truth ever emerge?

Edited by Guest
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32 minutes ago, Hairy Scot said:

Sorry for taking up so much space, but I know that The Times requires one to subscribe to read articles, so I thought I'd give you guys a freebie.:mischievous-grin-smiley-emoticon:

Appreciated that hairy....was easier to read.

33 minutes ago, Hairy Scot said:

As to the facts behind the case; many suspected that HMRC played more than just a peripheral part in the events of 2012.
Will the truth ever emerge?

I doubt if the actual truth regards why they did it will ever emerge but I was wondering how this information was discovered and made public mate.

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42 minutes ago, Harold said:

I doubt if the actual truth regards why they did it will ever emerge but I was wondering how this information was discovered and made public mate.

I'm sure many of us wonder about that.

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It’s been known for a long time something was going to come out no one knew what though. Personally I don’t know if it will make any difference but if there’s any truth in this story it has to be looked at closely 

Edited by Makdee
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51 minutes ago, Hairy Scot said:

Why did the establishment attack the one club that is known in Scotland as "The Establishment Club"?

The establishment in this country don't give diddly squat for Rangers Hairy. The governing body the SNP detest our club and the footballing establishment were more than happy to see the administration then liquidation considering the presence & influence of a certain Peter Lawwell. The clamour for Rangers to be banished to the bottom tier of Scottish football citing sporting integrity was overwhelming by almost every club. Sporting integrity ? Only when it fucking suits. Also bear in mind in 2008 when Gers reached theUEFA Cup final....were we helped out then? Were we fuck....5 games in 11 days ? And you had a 'certain club chairman' phone SFA then president George Peat demanding that no help be given to Rangers....that person was John Reid! Personally, they can stick the establishment up their collective arses!

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10 hours ago, Harold said:

The establishment in this country don't give diddly squat for Rangers Hairy. The governing body the SNP detest our club and the footballing establishment were more than happy to see the administration then liquidation considering the presence & influence of a certain Peter Lawwell. The clamour for Rangers to be banished to the bottom tier of Scottish football citing sporting integrity was overwhelming by almost every club. Sporting integrity ? Only when it fucking suits. Also bear in mind in 2008 when Gers reached theUEFA Cup final....were we helped out then? Were we fuck....5 games in 11 days ? And you had a 'certain club chairman' phone SFA then president George Peat demanding that no help be given to Rangers....that person was John Reid! Personally, they can stick the establishment up their collective arses!

The thing is that HMRC is not controlled by Holyrood, but by Westminster.
However it is quite possible that the left-footers in Holyrood and Glasgow City Council may have had some influence on the issue.

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7 hours ago, Hairy Scot said:

The thing is that HMRC is not controlled by Holyrood, but by Westminster.

Granted not at the time of liquidation. Just for info Scotland has its own tax raising power since 2018 so parts of HMRC up here will come under some form of |Scottish control as it's a devolved matter.

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1 hour ago, Harold said:

Granted not at the time of liquidation.

That was my point, and that is why I was and am puzzled at the attitude adopted by HMRC at that time.
I am not into conspiracy theories, but as someone once said, "Makes you think. Doesn't it?

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21 minutes ago, Normski said:

 

I will take that with a pinch of salt they admitted months ago they had made mistakes. Also they mention the company/Club that’s against their own rules. They shut their official Twitter at 10pm. S all in all it looks as though a wee drunk Declan will be getting his bows kicked today 

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2 minutes ago, Makdee said:

I will take that with a pinch of salt they admitted months ago they had made mistakes. Also they mention the company/Club that’s against their own rules. They shut their official Twitter at 10pm. S all in all it looks as though a wee drunk Declan will be getting his bows kicked today 

Who is Declan?

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