The 200% Podcast 13: FOUL!
The Power Of Discretion And Why Guidelines Are… King
Steven Gerrard, The Media & Liverpool’s Structural Issues
The Twohundredpercent Podcast LIVE!
Where, Exactly, Do Queens Park Rangers Go From Here?
End Of Season Ennui
The 200% Podcast 12 – General Election Special
Saturday Night On Channel Five For The Football League
The Decline & Fall Of Leyton Orient
Rape, Disrespect & Fury: The Oyston Family & Blackpool FC
Is It Time For A New Football Club For Newcastle?
Tranmere Rovers & Cheltenham Town Stare Into The Abyss
A recurring side-issue to Rangers current financial crisis has been the Scottish media’s apparent inability to get its facts straight. This, critics say, has come from a mixture of media faith in the “official” line coming out of Ibrox and a basic misunderstanding of the tax tribunal process. The former charge is as old as the Old Firm itself and it has substance. However, “basic misunderstanding” is often an alternative way of saying “agreeing with the other lot.” Add a bit of tabloid sensationalism and you end up with, for example, the Daily Record newspaper, pilloried as both the Daily “Ranger” and the Daily “Rebel” based on the same words and articles.
The latter charge has more substance. Rangers Football Club PLC appealed against an HM Revenue and Customs assessment that they have underpaid £24m in tax relating to the “Employee Benefit Trust” scheme they ran between 2000 and 2009. The issue went to a ‘First Tier Tribunal (tax)’ (FTT) under the auspices of HM Courts and Tribunal Service. The tribunal panel of taxation experts took evidence over numerous sessions dating back to October 2010. The final session was in mid-January and its findings will be issued…whenever the tribunal panel are good and ready. This could be by the time I’ve typed this, by the time you’ve read it or some time later (issuing their findings after Rangers’ administration process is over would add intrigue – like we need more of that).
Media sources have put specific timetables on the process, reported it as a future event after it had started, confused the FTT with a court of law, reported the FTT as a tax assessment body and even a branch of HMRC itself. All of these are basic errors, corrected by even minimal research into the concept of an FTT. The issue itself is way more complex – and unless or until I understand it, I won’t write about it. This stance has rarely been taken by Scottish football journalists, even those who have got the above basics wrong. Since the story broke in the Herald newspaper in April 2010, the liability for any debt has moved from football club to former owner David Murray’s business empire and back again countless times. And spurious cases for Rangers’ defence have regularly appeared, with Murray himself regurgitating some of the more common ones in his press briefing two weeks ago. These have included the following:
Tax avoidance is legal. EBT schemes are legal. They have regularly appeared in Rangers’ audited accounts, so they must be legal. Thousands of companies use them. Tens of thousands of employees are in one. And Rangers have not been accused of any criminal activity. All true. All irrelevant. Tax avoidance is legal. Tax evasion, which is what HMRC claim Rangers have done, is not. EBT schemes are legal. But Rangers are accused of maladministration of their particular scheme, resulting in allegations of illegal payments into it. Thousands of companies and employees have EBTs but that in itself is irrelevant if they are properly administered. And Rangers have not been accused of criminality. But they have been accused of illegality.
The difference may be subtle to the untrained eye – centring on the difference between criminal and civil courts. But these differences are among the first lessons of basic journalism training. “Divisions of the law” between criminal and civil were dealt with on page nine of my 516-page edition of Macnae’s Essential Law for Journalists, the common training course textbook. Clearly the Scottish editions went straight from page eight to eleven, or else these lessons have simply been forgotten almost throughout Scottish sports journalism. But until last week, I had faith that true “experts” would be able to cut through the crap (excuse the jargon). In the aftermath of his afore-mentioned newspaper briefing, designed to put his side of the Rangers saga, Murray was interviewed for Sky News by highly-experienced financial journalist Jeff Randall.
Unlike too many of his Scottish sports counterparts, he has been quite open about his football allegiances. And he was here, informing/warning viewers before he interviewed Murray on Sky News that he was a “Rangers supporter and shareholder.” But he gave Murray no easy ride, although six minutes air-time wasn’t enough to push Murray any further than his press briefing’s self-justification And his reference to the Rangers’ EBT scheme as “your tax wheeze” suggested he was not impressed by the former Rangers owner’s financial conduct. Joining Randall (“in the gherkin”) for a six-minute review of those six-minutes was “Mike Hayes, tax expert from accountancy firm Kingston Smith,” a man with specs best described as “studious” who exuded the sense that he did not know one end of a football from the other – a phrase I’ve had to use too often about people IN football.
Matters started off OK. Hayes clearly set out the basis of HMRC’s claim for back tax, that they “it would appear, have some evidence that (Rangers’ EBT payments) made to footballers were actually a reward for employment, and if they were contractual they would be taxable and liable to National Insurance.” “So the issue here is: were these payments ‘discretionary’”, Randall noted, correctly. Hayes then referenced “emails that the Revenue have between the club and certain football agents that would indicate that perhaps they weren’t discretionary.” “That would appear to be the nub of the matter,” Hayes concluded, again correctly. There, I thought. It wasn’t that difficult, was it? How have so many Scottish football journalists got that so wrong? My satisfaction was short-lived. Randall asked Hayes: “If Rangers wins (the tax case), having been pushed into this pressure from HMRC, would they suddenly become ‘uninsolvent’?
This was clearly a question born of a desperate need for assurance, rather than a degree in economics from Nottingham University – not least because Randall took three attempts (“unsolvent…er…insolvent…no…”) to stumble on a word which doesn’t exist, when all he had to say was “solvent again.” So I sat back and waited for Hayes to smile knowingly and patiently remind Randall that Rangers were “pushed” into administration for an entirely different tax bill – this season’s, the one that Craig Whyte didn’t pay, nothing to do with the last decade. I am still waiting. “It’s not as simple as that,” he began, again correctly. But this was “because it will go to the First Tier Tribunal first…” No, Mikey, no, that’s the EBT stuff, and that’s already been to the FTT…oooh ‘eck, he’s still talking…“and if Rangers win at that tribunal, the Revenue have indicated they will appeal it at a higher court and…” no, Mikey…stop…wrong tax bill.
To be fair to Hayes, he was giving an accessible and accurate indication of how the big tax case could go, and how long it could take, which was fair enough, even if it meant agreeing with the execrable Whyte’s assessment. So I still expected Randall – university economics degree, top financial journalist since 1986 – to make the distinction at some point. But no. “We have to give the club the benefit of the doubt,” he began. “If it does win, even in the very highest court, especially in the highest court, can it regain its financial credibility, its solvency?” “That is a question for an insolvency expert,” Hayes, noted, offering a less than comforting opinion which involved “taking the business through to another entity” – the dreaded “newCo,” and its attendant prospects of a break In Rangers’ 140-year history, a struggle to keep its honours… and Third Division Football next season. And it seemed a particularly stupid question. Was he really asking if Rangers’ administration could be undone? Surely he knew the correct answer was “don’t be ridiculous… you’ve got your tax bills confused.” Surely he’d got it wrong?
But just as surely, here was me with O-Level Maths from 1982, listening to decades of tax and financial expertise, delivered by at least one bloke in intellectual specs… surely I’d got it wrong. So I transcribed the interview to find any nuance or phrase that would have changed the whole meaning of the conversation. When that failed, I listened to the whole thing in real time again. And, no, it really seemed as if Randall had joined the ranks of Jim Traynor (Daily Record), Chick Young (BBC) and the other financial illiterates who have butchered this Rangers story over the last two years.
The clearest exposition yet of Rangers’ administration was published last Friday, in legal opinion of the administrators’ request for “directions” on their ability to terminate the infamous deal between Rangers and the Ticketus ticket agency (it says something when legalese is the “clearest” exposition of anything). This was the opinion of court of session judge Lord Hodge, whose involvement in recent Rangers courts cases has been extensive. And an early paragraph stated: “In its petition for the making of an administration order, Rangers referred to a debt of over £9m due to HMRC and stated…it was unable to pay its debts as they fell due.” So, yes, Randall’s question was wrong, as wrong as any Daily Record journalist (other Scottish tabloid butchers of this story are available).
He may have been asking this in the hope that Hayes would clear up the misinterpretation. But any hope that Randall was merely employing a good journalistic technique was dashed when Hayes failed to do this, and Randall let the matter lie anyway. So… why? Some will, of course, find their answer in Randall’s words: “a Rangers supporter and shareholder.” But I cannot believe Randall leave such an outlandish theory unchallenged in the hope that anyone influential would entertain the prospect of a Rangers victory in the big tax case reversing their administration. And I cannot believe Randall entertains hopes that Rangers will get their ten points back, leaving them eight points off the SPL lead after beating Celtic on Sunday, and still in with a faint shout of a fourth title in-a-row. Yet the only other logical explanation for such an error is massive journalistic incompetence, the sort which, somehow this Rangers story has inspired throughout Scottish football journalism. And you needn’t be a Celtic fan to believe that is not quite right.
You can follow Twohundredpercent on Twitter by clicking here.
This is the second article of yours I have read….and I’m most impressed.
You bring a clarity and insight into the current shambles at Rangers in a banaced and informative way.
You quite rightly slate the Scottish Media for their “silence” on certain matters and their ignorance on just about all other matters..well done.
I have no wish to know your background or your football “preferences”…but if you’re not Scottish….and are new to this situation….I can confirm that people like me have been aware of it for more years than we care to remember.
Keep up the good work.
Interesting article but I’m afraid that it contains its own “basic misunderstandings, particularly on the tax evasion/avoidance distinction. Tax evasion is the deliberate non-payment of taxes, in the knowledge that they are due, and is a criminal offence. Rangers are not currently accused of tax evasion (though some have suggested that they should be). Strictly, there is no such thing as tax avoidance. What people call “tax avoidance” is basically the arranging of one’s affairs in order to minimise one’s tax liabilities, in a way that argaubly conflicts with the so-called ‘spirit’ of the tax laws. But either tax is due as a matter of law (in which case, it must be paid, and deliberate failure to pay it is evasion), or it is not legally due (in which case, nothing has been avoided). This is not just my view but that of Lord Hoffmann, the former senior Law Lord. Tax avoidance is a term that HMRC loves to use to tar those who engage (sometimes unsuccessfully) in tax planning with the same brush as criminals who deliberately evade taxes that are unquestionably due. So it’s better to avoid framing the debate in terms of “tax avoidance”.
You’re right that setting up and running an EBT is not, in itself, illegal. The Tribunal will determine whether or not the setting up and running of an EBT by Rangers gave rise to (currently unpaid) tax liabilities. If so, then it was illegal (as a matter of civil law) for Rangers not to pay those taxes as they fell due – and Rangers must now cough up. In that sense, “tax avoidance” is illegal – contrary to what you assert in your article. However, if the Tribunal decides in Rangers’ favour, then no tax was due and Rangers have not acted illegally. That is presumably what you meant when you said that “Tax avoidance is legal”. So to recap: successful tax ‘avoidance’ involves no illegality; unsuccessful tax ‘avoidance’ is contrary to the civil law; and tax evasion is a criminal matter. I hope that you’ll agree that the term “tax avoidance” is misleading and gives rise to much confusion.
Hope that helps!
Excellent article. Many thanks.
Thank you for this excellent and, almost unique in the saga,accurate article. I have read with a mixture of disgust and embarrassment the pathetic articles in the Scottish media and listened in disgust as one broadcaster after another on radio Scotland failed to do what they are paid for.
Like a previous poster, this is also the second article on this topic I have read from your site. Again, it was excellent.
I am pleased that there is no way of telling what your footballing allegiances are, or if you have any at all. It is a well written, researched and balanced piece.
I watched that interview and like you shook my head in disbelief at the inabilty of “experts” to grasp the distinction between the FTT/Big tax case and cause of administration-the non payment of vat/paye/ni since last May.
You’re not my hero anymore….
Martin Kelly is….:0)