So which way will Ritchie jump over Rangers?

Supporters and former directors of the old Rangers Football Club were handed a pyrrhic victory over Revenue & Customs last night in the tax case that helped to close the business down.

To the grim satisfaction of the fans, a tax tribunal delivered a majority verdict on the club’s use of Employee Benefit Trusts (EBTs) over a decade, and found in Rangers favour.

HMRC had challenged what it claimed was an “orchestrated scheme”, arguing that £49 million in payments to players and staff amounted to wages, and was liable to tax. The tribunal ruled most of the payments were loans from the club, an outcome that will “substantially” reduce its bill for tax and national insurance contributions.

A world famous football club, driven into bankruptcy, by HMRC demanding, with menaces, more tax than was legally owed.

But of course we are meant never to challenge the taxman. Just to open our wallets and say \”help yourself\”.

So just what is Mr. Murphy\’s view on a negative tax gap like the above?

23 thoughts on “So which way will Ritchie jump over Rangers?”

  1. He will say…

    “HMRC have deemed that tax is due, therefore it is due and must be paid. All your monies are belonging to us.”

  2. HMRC should be forbidden by law from closing down any business, unless there is clear and proven illegality involved. The sort of reasons/excuses they give “unfair to other tax-payers” etc, are specious. There is almost always a better chance of repayment rom a going concern than from a dead parrot.

    Alan Douglas

  3. They must be courageous and have everyone associated with Rangers arrested in dawn raids and shot as enemies of the people

  4. To be fair to HMRC here, Rangers have been on the verge of bankruptcy for a while. It’s what tends to happen when you have a business valued at ~£100 million that’s actually only worth around a tenth of that at most.

    Notably, Hearts are also currently in trouble over unpaid tax debt – the final refuge of those who are no longer creditworthy – but really this is just the tip of the iceberg: it’s extremely likely that several clubs in the SPL have been trading whilst insolvent for at least the last five years, and it’s not impossible that there isn’t a single one which is actually solvent. The whole league is in a complete mess financially.

    HMRC may have precipitated the crises, but it’s certainly not responsible for them. Rangers owed £140 million on top of the tax bill that’s now been ruled on in their favour – although not 100% in their favour, so they still can’t pay it – including £15m to the taxman. The club had turnover of around £35m a year on average, making it plain just how ludicrous that level of debt was. The final owner of the business before the crash was a fraudster who got caught thanks to HMRC.

    I don’t see anything wrong with HMRC’s actions in this case.

  5. Dave,

    I’m no fan of rangers but the tax bill appealed, the so called Big Tax Case amounted to £94m (including estimated penalties) of the £140m, there was a small tax case of £5m and £10m of Paye and VAT. The remainder was owed to Ticketus based on revenue for future season ticket sales therefore it was in their interest to keep the business going. Not forgetting the £6-8m of fees earned by the administrators.

    There’s no doubt that uncertainty over the Big Tax Case and the the fact the appeal took over a year was the main factor Rangers were put into administration, then liquidated.

  6. Alan>

    There’s been a lot of obfuscation by various interested parties, but broadly speaking the picture is clear: Rangers owed money right, left, and centre, including £15m fraudulently retained which should have been paid to the taxman.

    The ~£140m did include the disputed tax bill, you’re right – it didn’t include money owed to Ticketus, though. That Ticketus were owed all the proceeds from Rangers’ only significant source of income tells you what a financial basket-case the club was.

  7. Not sure HMRC are the baddies here.

    As Dave said, Rangers would have gone into liquidation anyway. They were poorly run from a financial perspective and heavily in debt. By the last year or so of their existence they were deliberately withholding NI, income tax, VAT, and payments to other football clubs they owed money to. The taxman didn’t encourage them to spend their way to oblivion.

    Also HMRC seemed to have, on the face of it, a strong case. Nobody involved seems to have entertained any expectation that these “loans” would ever be repaid. (If they were indeed loans, they should be repaid to the liquidators for the benefit of Rangers’ creditors, surely?)

    The BBC said it had seen letters to agents confirming that players would be partly remunerated via these “loans”, which suggested to HMRC they were in reality part of their pay and therefore should be taxed as such.

    Also there’s a chance this decision will be overturned if HMRC appeals.

  8. “everyone associated with Rangers arrested in dawn raids and shot as enemies of the people”: as long as they did it for Celtic too, it would undeniably leave Scotland a better place.

  9. Dave,

    the £140m does include Ticketus, Duff and Phelps went to court to establish that they were unsecured creditors.

    The issue here is the time it took the appeal to be determined caused uncertainty that forced Rangers into admin, resulting in a lower return for all creditors (including HMRC) and a fee fest for IP’s.

  10. Alan – I’m not sure how the uncertainty over that case forced Rangers to stop paying its other bills, or indeed to accumulate so much unsustainable debt in the first place.

    Seems like HMRC are the fall guys here for Rangers’ colourful owners and imaginative business practices.

    Also, what if HMRC appeals and wins?

  11. Alan>

    “the £140m does include Ticketus, Duff and Phelps went to court to establish that they were unsecured creditors.”

    Really? I’d missed that. I vaguely remember Ticketus being on the wrong end of some nonsensical ruling on the matter from a Scottish court, but I assumed they’d appealed to someone competent and had it overturned in favour of something that made some sense. I forget the exact justification, but wasn’t it something completely barmy like that having a charge over a company’s assets isn’t enough to make you a secured creditor?

  12. Steve,

    Loyds Banking Group forced David Murray to sell due to the threat of the Big Tax Case. No creditable buyer would touch it due to the BTC. Rangers bank debt was £18 plus the small tax case (£5m)and they had £6m cash – sustainable for a club of its size-even in Scotland. Craig Whyte bought them for £1 and cleared the Lloyds bank debt by mortgaging future season ticket sales to Ticketus (he did not disclose this). Opinion is that he thought he could pre-pack when the BTC was determined which he expected to be the beginning of this year. however they went out of Europe and run out of cash and couldn’t pay PAYE (even if he ever intended to?), Whyte couldn’t borrow against the assets due to his questionable business history and the BTC.

    Rangers would not have been sold to Whyte if the BTT had been determined, in the end assets valued at £100m (questionable) were sold for £5.5 by the administrators in a fire sale and £10-£20 million of playing talent walked out the door, the administrators themselves pocketed £6m.

    The whole things been a disaster for Creditors

  13. Dave,

    The judge said that the deal stood but under Scots Law Ticketus couldn’t secure payment against the seats in the stadium post administration making them unsecured creditors and letting D&P sell the stadium unencumbered.

    Ticketus have raised an action against Craig Whyte for their loss.

    There is some speculation that Ticketus are backing the Green Consortium that bought the club and assets. Green is currently conducting a £20m share issue on AIM claiming the assets are worth £100m, that they will play in the EPL and that they have 500 million fans worldwide amongst other nonsense.

    The club is playing in the scottish third division to 40,000 home crowds and is still expected to lose £3.5m this year due to reduced TV revenue an no european football. It still has the second highest wage bill in Scotland – without a successful share placing it will run out of cash again and probably fall into admin in January.

  14. Alan>

    Oh, right. I lost interest in the whole thing a while back when it became clear just how insane everyone involved seemed to have become. The point when they forgot to turf the old Rangers out of the SPL was good for a laugh, but mostly it was just a bit sad.

    The sheer vindictiveness of the other SPL teams’ reaction was not exactly edifying either, since it’s pretty clear that several, if not all, are going to go bust as a result of kicking Rangers out of the league. You can bet your house that the same people who complained about Rangers ‘cheating’ by going bankrupt will claim in a few years that Rangers gained another unfair advantage by going bust first.

  15. Ha. The football fans all sniggered when our ice hockey club folded for similar reasons about ten years ago. Lots of muttering about minority sports who couldn’t afford to pay their players etc etc.

    Schadenfreude.

  16. Alan,

    The only reason the Big Tax Case was hanging over the former Rangers Football Club for so long was the deliberate obstruction of the HMRC investigation and subsequent tribunal by Rangers and other Murray companies.

    They delayed for 4 years by witholding crucial evidence from the information they volunteered to HMRC. Something that was only discovered when the original files came to the attention of the City of London Police in an unrelated investigation. They passed the information to HMRC who went in and siezed the originals.

    During the tribunal itself, Murray’s tax advisor met one of the “independent” trustees on the eve of her giving evidence. This trustee was supposed to be given copies of documents on a routine basis but never had been. At this meeting the tax advisor very, very belatedly handed over the documents in a brown envelope so that she could state to the tribunal she had received them.

    The tribunal did not find the tax advisor’s evidence very credible (what is it about Rangers and uncredible witnesses?). Indeed they noted on several occasions that the appellant’s witness statements had been drafted in such a way as to ensure that everyone knew what the score was.

    The minority dissenting opinion (longer than the majority opinion!) is noteworthy. It makes very clear that author considered that the “loans” were not loans but enoulments. Reading it, HMRC would stand a very chance of winning on appeal if they went down that road.

    This case wasn’t another Vodafone or Starbucks or any of the “tax avoidance” cases that Murphy and other idiots moan about. This was a deliberate attempt to pull the wool over the eyes of HMRC and somehow they have managed to succeed (for the moment) despite the clear evidence.

  17. The real problem here is that by its very nature taxes are paid in lieu making HMRC a creditor to every UK business, whether we like it or not.

    With the removal of HMRC’s preferred creditor status in 2002, this has led them to being more proactive to stem losses and using insolvency measures to do so.

    HMRC are not the villains here. They might have been the ones to switch off the Rangers life support machine, but they weren’t the ones that brought Rangers to deaths door anyway.

    Those responsible were Rangers owners and managers.

    Ritchie will probably say “HMRC will win this on appeal”. I agree with him, albeit for different reasons, Rangers don’t deserve to win this.

    “Fiat justitia ruat caelum” (Latin to English translation “Let justice be done though the heavens fall.”

  18. I must admit to being a bit dibious about the figure of £140m” over and above this contended EBT bill.
    I have seen no evidence of such a sum anywhere else.
    The best figure I could get to was just over £50m owed (which isn’t unusual for large football clubs — worryingly !!).

    Interestingly, if the assets WERE “undersold”, and DID actually have a value of £100m+, then this makes the case for the administration and indeed the liquidation of the club even more tenuous.

    What concerned most onlookers at the time was the fact that the Administrators (D&P) simply accepted the HMRC figures and did not go down the road that their equivalents had at Portsmouth several years ago, and simply decalred that the HMRC “share” of the debt had been recalculated to a lower level.
    In the case of the unsubstatiated EBT demand — to “nil”.

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