Published on February 4 2013
AS Rangers fans digest the news that HMRC will appeal the result of the first-tier tribunal – the big tax case – perhaps the most pertinent question came from the chief executive of the new club, Charles Green.
“There is no money to be gained by HMRC as the old company has been liquidated so you have to ask why they are pursuing the matter further when the original EBT enquiry took years to reach a conclusion.”
It’s a brilliant question from Mr Green and one that cuts straight through to the heart of the matter.
The majority verdict in the first-tier tribunal, which investigated Rangers’ use of the employee benefit trust scheme (EBT) and sought to rule whether the practice – used to pay a portion of staff wages – was a breach of UK tax law, ruled that the majority of Rangers cases using the EBT tax avoidance scheme were legal.
HMRC’s view was that the practice was not within the law – which could make it tax evasion – and that the club owed the taxman a sum of £24m in taxes due, with interest and penalties applied, taking the total to somewhere in the region of £50m. While Rangers accepted liability for a number of cases, should the big tax case verdict stand it would result in a substantially lower tax liability and, importantly, a useless verdict for HMRC.
It’s estimated the UK struggle to tackle tax avoidance leaves up to £10.2bn lost, while HMRC point to damages to the economy of £14bn per year as a result of tax evasion. That represents £769 for every family. It is money drained away from public services.
During the 2012 budget speech, Chancellor George Osborne said: “I regard tax evasion and, indeed, aggressive tax avoidance, as morally repugnant,” while UK Prime Minister David Cameron has called for international action on the multi-billion pound problem.
Press coverage in Britain has focused on the tax affairs of big corporations Amazon and Starbucks, with public pressure on the companies to step up and pay, while attention has even been drawn to high profile celebrities who use tax avoidance practices, such as Jimmy Carr. In November 2012, HMRC sent letters to 1,500 people it suspected of using a particular tax avoidance scheme, the first time any such action has ever been taken by HM Revenue and Customs.
The cost of tax avoidance and tax evasion to the UK economy is a difficult pill to swallow in times of austerity. It is in the public interests to minimise those sums. It is the job of HMRC to pursue tax monies owed and the job of the government to introduce legislation that protects the public purse.
In Scotland, a number of fans of Rangers feel the former club is being victimised by HMRC’s decision to pursue this case. With Rangers now in liquidation, it is true HMRC will never receive any tax monies owed by the club, and it is also true that fighting this case will result in another bill for the taxpayer.
After the verdict of the first-tier tax tribunal was released, an e-petition was set up by Rangers fans calling for an inquiry into the handling of the case by HMRC. The petition received almost 40,000 signatures, warranting a response from government, which made the position clear.
“HMRC is disappointed to have lost the first-tier tribunal stage of the court process and, as stated, will seek permission to appeal the tribunal decision.The decision was not unanimous and the diligence of HMRC investigators was acknowledged by the whole tribunal. HMRC is committed to tackling avoidance and it is right that HMRC challenges the type of avoidance seen in this case to prevent the loss of substantial amounts of tax and NICs.”
Winning the big tax case is no longer about retrieving taxes for the public – it has been clear for some time that Rangers will never pay any of the 276 creditors owed money when the club went out of business. It’s about setting down case law; with a victory in this case, HMRC has a decision it can take to any other football club or business which has used EBTs and demand the money owed. A defeat for HMRC doesn’t send much of a warning message to those who avoid or, illegally, evade tax.
However, when a football club – an institution in Scotland with a huge fan base and 140 years of history – can go to the wall and HMRC makes it plain that it isn’t over yet, the message may be getting louder and clearer.
Charles Green asks a very important question. HMRC would approve.
Given that it was PAYE and NIC that was being avoided, could HMRC not pursue the individuals who were in receipt of the EBTs if the appeal finds in their favour?
Angela if the HMRC win the appeal would it then have the basis for chasing the people who received EBT,s for them to pay tax on these “tax free loans” ? or to pay these “loans” back as MIH are still in business and then claim from MIH ?
Paul, it’s my understanding that in the case of PAYE & NIC, this money was deducted at source but was not passed on to the relevant authorities, (HMRC &NHS) but used to run the club and pay players wages.
Is there anyone who can verify this or am I wrong?
I think these are two separate issues. The issue you are referring to SH is Craig Whyte keeping back PAYE, NIC and VAT and using them as working capital.
HMRC will certainly go after him or any of his entities for that money – that is why they wanted control of the liquidation.
In terms of PAYE/NIC on the EBT loans, yes if HMRC wins its appeal there is a mechanism for recovering such amounts from company directors only – in this case Murray is the most likely target – if the directors were knowingly culpable.
There was an article on this on the MLM Solutions blogspot in November I think which I can recommend.
This is going to run and run; Rangers got a dishonourable mention yesterday from Gianni Infantino the UEFA general secretary, in the context of financial fair play. It’s all bad news for the share price – the appeal will be heard in the autumn and expect a decision before Christmas. I do not expect HMRC to lose this one.
What actually undermines Greens’ attempt to move forward is his insistence that Rangers is exactly the same as it ever was, with just the one exception – the debt that has been dumped.
In the real world, you cannot dodge debt and not expect the consequences – consequences note, not punishments – that inevitably follow.
Green’s SOLE concern is the share price because his only path to riches lies down that road. There won’t be any uber-bonuses to be gained from the actual football performance, going on last Saturday.
The shares have already lost 10% from their peak and if there is any merit in the suggestions that Asian investors either are not putting in the money promised, or want it back, then that is all going to add to the bad karma.
Cheers guys, I only just learned the other day that NI contributions were owe on EBTs, that’s what threw me.
HMRC’s position is well laid out but what is Chazza Green’s agenda?
If as he says the debt remains with the old club and the ‘new’ Rangers won’t be held liable regardless of the outcome of the current HMRC appeal, why is he so concerned about that appeal?
Could it be he is worried that HMRC is spending much needed revenue pursuing this matter?
Such a pity he wasn’t in charge of the old club, where I’m sure such a public spirited person would have made sure Rangers taxes were paid up fully.
The reason for the appeal is two fold.One is the football clubs, mainly in England.The EPL is awash with money,they pay their stars £250,000 a week have a turnover of approx £2.2 billion,but between all the clubs they only paid £3 million in corporation tax,yeah that’s right all the clubs added together paid only £3 million.With clubs like Man Utd,Spurs etc,etc paying no tax at all ! Funny thing is we don’t heard anyone calling them cheats,wonder why ?
The second reason would be the ‘assumed’ debt from the BTC that HMRC claimed.Which resulted in HMRC being named as the biggest creditors,which was then used to reject the CVA.If they hadn’t appealed then basically they were leaving themselves open to legal action from the liquidators,who would rip them a new hole for forcibly closing a company on a ‘false’ debt and probably claim millions in compensation to repay people.HMRC knows they can stretch this out for years and by that time the liquidators would be finished and they would have no case to answer.
AS, unlike David Murray, HMRC have no interest in “stretching this out for years”. The appeal hearing will be short and to the point -probably held in early October, with a decision by early December at latest. The liquidators are acting for HMRC, not against them.
But I agree there are two reasons for pursuing this case, the second reason is to allow them to possibility of pursuing personally any previous director of the club who may be liable to pay the tax and NIC due on the EBT loans.
BDO are not working for HMRC they are a private firm that has been appointed by the court of sessions to investigate independently.That investigation will not only include directors,the actions of the tsb etc,etc.But also the actions of HMRC,remember they presumed guilt before a verdict had been decided(which goes against our justice system as everybody is innocent until proven guilty under law) a verdict which went against them.
Meaning they were not the biggest creditors and had no legal right to refuse the CVA.As of right now since HMRC lost the case ticketus are the biggest creditors and they wanted the CVA accepted,hence one of the reasons for the appeal.I’ll bet a penny to a pound that the company is liquidated before the tax case ends !
The big tax case was civil law, not criminal, innocent until proven guilty doesn’t really apply here. It’s a different branch of law and not as black and white as innocent or guilty. HMRC as the tax authority served Rangers with a bill for money owed. Rangers appealed that bill and it was successful in the majority of cases, although liability (a tax bill) was accepted on some of the cases. HMRC will now appeal the decision to overturn their original tax assessment. Had the big tax case appeal decision stood, the tax liability would have been reduced, but it would still have been in the millions. Add the tax owed under Craig Whyte and the other Murray-era ‘wee tax case’ bill and there’s every chance HMRC would have remained the biggest creditor.
Yes civil law is different from criminal law,in that civil law is easier to prove guilt as you only have to prove the ‘probability of guilt’.But the fact remains that you have to prove a degree of guilt and no matter if its criminal law or civil law you are innocent until proven otherwise !
And ticketus are the current biggest creditors with just over £30 million owed to them,the £9 million not paid by GW even added to the £4.2 million from the STC and even if you include the penalty charges.It still falls short of the money ticketus are owed.
Hate using my phone for stuff like this,so if it doesn’t come out right I’m blaming the phone 😉
We don’t know what the final HMRC bill is/would have been even with the appeal. RFC were served with a tax bill, the tax authority deemed the club ‘guilty’. The club then appealed the decision. The process is ongoing. Talk of innocent and guilty is misleading.
Although it’s obvious the people at Rangers feel no shame about the huge losses to the taxpayer and small businesses from their oldco’s behavior, Mr. Green will not want the adverse headlines while he is pretending his Newco is the same club etc. The brand would be even further damaged. It does sicken me when I hear Green or Traynor bragging about how strong their financial position is now having left a trail of destruction. I’m not convinced it is so strong but certainly better than if they hadn’t walked away from oldco.
Angela hate to break it to you but the HMRC has no legal right to deam anyone guilt of anything that’s for our peers in courts to decide ! Yes HMRC have appealed but the old company not the club was found to have run the EBT’s in a non tax evasive method.
I understand where you’re coming from but you also have to take our British justice system into account,as of right now the old company has done nothing wrong and have been found innocent of tax evasion.The appeal is meaningless until resolved,same as when a man is found guilty of murder he might appeal the decision but he’ll still be in jail as a guilty man and will remain so unless the judgement is reversed.
Rangers conceded in a number of cases that they DID owe tax. Does that make them ‘guilty’?
Yes they conceded in a few cases where appearance bonus money was accidentally paid out of the trust instead of the usual account.That administration error was conceded before the hearing began,the hearing was about the general running of the EBT’s and in this the old company was found to be innocent of tax evasion.Obviously if they were guilty in anyway there would be no need for the HMRC to appeal.
Are the old company whiter that white,in my opinion no ! But as a Rangers man I want the liquidators to fully uncover everything and fully investigate everything from the actions of GW,the old directors,the TSB,ticketus,right up to the actions of the HMRC !
HMRC is trying to claw back taxes, that’s its job and they are pursuing this case because they believe it is in the public interest to do so – and they’re backed by the UK government.
The HMRC are public servants and this means they are fully accountable to us the British public just the same as the UK Government are ! As it’s an ongoing case not much ‘we’ can do right now,but serious questions have to be asked !
As you said they have to work for what’s best in the public interest and since there is zero chance,even if they win,of getting much if any cash.What exactly is the public interest in this case ?
It can’t be for a precedent for English clubs as they have the unique ‘football creditors’ rule’ which the Scottish teams don’t use and after the ill-fated and arguably misguided prosecutions by HMRC of the former Portsmouth owner, Milan Mandaric, chief executive Peter Storrie and manager Harry Redknapp for alleged tax evasion, all of whom were acquitted.Confidence in the HMRC’s ability to do what’s in the public interest when it comes to football is seriously in doubt !