The Rangers Tax Case: Then, Now & Forever

by | Jul 8, 2017

Between 2001 and 2010, Rangers FC participated in an Employee Benefit Trust (EBT) scheme, the “Murray Group Management Remuneration Trust (MGMRT). “So far as Rangers were concerned,” this scheme “enabled the Club to attract players who would not otherwise have been obtainable,” the “Murray” of the Murray Group, Rangers ex-chairman David, admitted to a “First-Tier Tax Tribunal” (FTT). On Wednesday, the Supreme Court declared that scheme unlawful.

In February 2013, Lord William Nimmo-Smith reported on his Scottish Premier League (SPL)-commissioned investigation into Rangers’ alleged breaching of league rules in the operation of the now-unlawful scheme. The good Lord noted that it was not a breach of Scottish club football rules “for a club to arrange its affairs, within the law, so as to minimise its tax liabilities.” The FTT had “held (subject to appeal)” that Rangers acted “within the law in setting up and operating the EBT scheme. Accordingly, we proceed on the basis that the EBT arrangements were lawful.” On Wednesday, the Supreme Court declared those arrangements unlawful.

Rangers were not acting within the law. Rangers cheated. For years.

Even the Supreme Court’s legalese, and that of the Inner House of Scotland’s Court of Session, upon whose 4th November 2015 ruling the Supreme Court ruled this week, could not mask Rangers’ cheating. They cheated with the specific intention of gaining an unfair sporting advantage. Just as cyclist Lance Armstrong…who had titles stripped as a result.

Over the next few days, I can say with some certainty because it has started already, a number of narratives will be thrust into the public domain, with the specific intention of leaving Rangers unpunished for a decade of cheating.

Some Rangers supporters will claim that it wasn’t cheating at all, they just paid the wrong amount of tax. To the tune of £24m over a decade. But, hey, we all make mistakes. Some hands will get sore from clutching at straws, such as those complaining about an STV website headline claiming Celtic were “calling for a review” of decisions connected to Rangers’ cheating to win titles. They were right. But only because Celtic were more than “calling” for a review. “Sure” that “the footballing authorities will wish to review this matter,” they said they are awaiting its “outcome.”

Other Rangers supporters will claim they have suffered and been punished enough and that any desire for further punishment is born of hatred and anti-Rangers bigotry, which I can say with some certainty because it has started already.

Others still will consult their list of “whatabouteries,” and select “what about that Celtic Tax Case?” (link to my article) and various forms of “what about Celtic’s child abuse?” Which I can say with some certainty because, yes, even that shit has started already.

Scotland’s football authorities will claim there is no mechanism and no appetite for stripping Rangers of the titles they won while cheating. I can say that with some certainty because it has started already.

And it isn’t because there IS no mechanism. There was in 2012 when they offered a grubby title-stripping deal to grubby new Rangers owner Charles Green, so that must be in a cupboard somewhere…unless they gave it to a jumble sale. And title-stripping was one of the 19 sanctions available to the LNS commission. Where there’s a will, there’s a way.

Nor because there is no appetite. It is too early to judge, although the fan activism of “No to NewCo,” which fought successfully against the new Rangers’ insertion into the SPL in 2012, has clicked into gear again. A “Strip the Titles” movement is beginning to burgeon as I type.

The Scottish Professional Football League (SPFL) “will take time to examine the judgment in detail and consider any implications for the SPFL.” I can say with some certainty because it has started already. And it won’t be because they WANT time to examine the ruling and consider any implications. There are none, the league titles Rangers cheated to win predate the organisation. But because they don’t want to respond.

And Scotland’s mainstream football media. Well, they will cherry-pick from all of the above, plus whatever line Rangers’ PR department are pushing, because original thought and proper investigation appear to be as beyond their pay grade as they have been claiming it has been throughout the seven years of the “Rangers Tax Case.”

I can say that with some certainty, not only because that has started already (the BBC’s Chris McLaughlin the early pace-setter, despite the problematic relationship between club and broadcaster) but also because it hasn’t ever stopped throughout the seven years of the “Rangers Tax Case.” To them, I shall return. And you ALL know I can say THAT with some certainty.

And all of them…the excuse-making fans, the dishonest, clueless authorities and the spineless, clueless mainstream football media…they can all stick their spineless, dishonest, clueless excuses up the River Clyde and **** OFF while they’re doing it. Rangers cheated pure and simple.

The Rangers scheme upon which the Supreme Court ruled this week, the MGMRT, was the second tax avoidance scheme used by the club this century. The first scheme, the validity of which was never in legitimate formal dispute, has its own on-going narrative, concerning the award to Rangers of a licence to play in European competition during the 2011/2012 season. Regular readers may recall one or two words of my own on the subject. Resolution 12 and all that.

This licence award was seen by the football authorities as vital to the club’s financial well-being, as demonstrated by Rangers’ subsequent earliest possible exits from the Champions and Europa Leagues and descent into administration on 2012’s St Valentine’s Day and liquidation exactly four months later.

(There are echoes of 2011/12 in 2017/18, given the new Rangers’ declared reliance on loans to fund their close-season transfer splurge, despite the recent influx of season-ticket millions. But would I stoop so low as to shoehorn this comparison into this article solely to facilitate reference to Rangers’ humiliating Europa League defeat to Luxembourg’s fourth-best team, Progres Niederkorn, this week? Damn right, I would).

The validity of the MGMRT, and Rangers’ active, decade-long participation in it, has never NOT been in legitimate formal dispute. Scotland’s national mainstream media (MSM) picked up on the case on 27th April 2010. The Herald newspaper’s Darrell King offered via headline to reveal the “tax claim that could cripple the club,” as part of the wider contemporary story of Rangers’ £30m debts and struggles to find a buyer.

The following day’s Herald went large on the tax case. King was away focusing on potential Rangers buyers, including namesake Dave (South African-based chap, talks sh*te to the press a lot…oh, YOU know him). So, Chris Watt, not primarily a sports journalist, penned a piece headlined “Rangers face £24m tax bill for offshore payments to players” and an analysis entitled “Tax move may come back to hit Rangers where it hurts.”

Answering the question “What exactly have Rangers done?” Watt wrote: “The club have been paying some players in part through an Employee Benefit Trust (EBT). Instead of incurring hefty income tax and national insurance bills, Rangers have paid the money into an offshore account. This is then ‘loaned’ to players at a low interest rate, currently 4.5%, with no expectation of players repaying it.” (4.5% as “a low interest rate.” Different days).

The question “Is this legal?” was as vexed then as the MSM continue to try to make it to this day. Watt answered, confusingly: “Yes, although it is a matter of opinion,” adding that HMRC had “pursued cases against firms that do it, claiming they are breaking the law.” The money involved at Rangers was “about £46m, according to figures obtained by the Herald” (conceivably from Rangers’ published accounts, which included annual overall contributions, thus allowing defenders of the scheme to this day to claim that “they were in the accounts”).

And “assuming that all players were on the top rate of tax” (a fair assumption given Murray’s famous 1998 declaration that “for every £5 Celtic spend, we will spend ten”), Watt suggested that Rangers owed “roughly £24.3m” in “PAYE and National Insurance Contributions,” an estimate which has stood the test of time.

The big miss from Watt’s otherwise impressive analysis was the fact that certain players received “side-letters” confirming what was to be paid into the trusts. At face value, this strongly suggested that the funds in the trust were entitlements, rather than the “discretionary” and “bonus” payments Murray would later excuse them as. And players’ agents appeared to be driving the demand for these so-called “second contracts, perhaps anxious to maintain the value of their proverbial “ten percent.”

Rangers responded at the time by acknowledging the “on-going query raised by HMRC, which is part of a pending court case,” adding that “on the basis of expert tax advice provided to Rangers, the club is robustly defending the matters raised.” Standard stuff, and bog-standard accuracy, the “court case” being the Tax Tribunal.

On the subject of bogs, Rangers then-chairman Alistair Johnson said “This is not a new problem. It has been there for a long time,” which was truer than Rangers had been pretending to the outside world. Indeed, the world of offshore trusts and side-letters was exposed largely by accident, during investigations into other murky football dealings.

All went quiet in the mainstream, although Rangers’ general finances were still under scrutiny as Motherwell-born businessman Craig Whyte’s bid to buy the club snaked towards conclusion in May 2011. And a smaller, seemingly undisputed £2.8m tax liability which emerged on April Fools’ Day 2011 briefly appeared to be the major threat to Rangers’ financial future.

However, on 28th March, the “Rangers Tax Case” blog started filling in the gaps in the story left by the MSM, i.e. pretty much all of it. The blog’s home page reprinted with undisguised pride, Whyte’s view that “what they are saying is 99% crap.” Whyte was, we now know, 99% out.

The case loomed large as Whyte’s Rangers regime struggled appallingly to pay bills after Rangers’ European dual-exits, giving up on the tax bill entirely. However, Rangers entered administration AND liquidation while the (three-person) FTT mulled at unforeseen length over the minutiae of tax law as it applied to Rangers’ scheme.

The corpse was ponging a bit by the time the FTT upheld Rangers’ appeal against Her Majesty’s Revenue and Customs (HMRC’s) claim for £24m in unpaid tax, plus at least half as much again in interest and penalties for late payment. The decision was announced on DAY November 2012. Rangers’ actual tax liability for improper operation of part of the scheme was, in the words of the judgment, “substantially reduced.” To what, we still don’t know.

The FTT ruled by a majority verdict of two-to-one. The scheme was ruled lawful for a number of reasons. Surprisingly to many observers, HMRC had not argued that the trusts were a sham. And the FTT ruled that the payments into the trusts were loans, not entitlements, which were not “unreservedly at the disposal of” the EBT holder because the scheme did not include any obligation to make loans to trust holders when they requested them.

Having been “told” by all and sundry that their overall liability might have been anything up to £75m had liquidation not intervened, the new Rangers claimed victory and vindication on behalf of the old Rangers and called for widespread apologies and retribution. The fact that HMRC sought and obtained leave to appeal the decision was reported perfunctorily, when it was reported at all, with HMRC’s prospects of success dismissed. Indeed, HMRC lost an appeal to an Upper Tribunal in July 2014, although some parts of the case were referred back to the FTT stage.

But truth changed last November when the Inner House of Scotland’s Court of Session ruled, and I’m paraphrasing here, that “Of course the trust’s funds were entitled earnings for playing football, what else could they be? Of course they are taxable.” The fact that BDO, the accountancy and business advisory firm appointed as the old Rangers’ liquidators in 2012, sought and obtained leave to appeal co-headlined the story this time. Calls for apologies and retributions were slapped down with references to the Supreme Court

There is SOOOO much to write about the RTC denouement. However, like the SPFL, I “will take time to examine the judgment in detail, consider any implications for” my next rant article (on a few days’ holibobs by the time you read this). And I will comment further upon how this whole sordid affair has exposed two major fault lines connected to Scottish club football.

They are the usual/same old ones, don’t get your hopes up. The fundamental weaknesses in the governance of Scotland’s club game and the two men with most responsibility for that governance and those weaknesses, SPFL chief executive Neil Doncaster and Scottish FA counterpart Stewart Regan. And the appalling coverage of the affair, on about every conceivable level, by mainstream Scottish football journalists and analysts.

For now, though, it is only fair to acknowledge and thank those few who were “right all along” about the “Rangers Tax Case.” The RTC blog for a start, which won the Orwell Prize for political writing in 2012, having exposed and explained the true story of Rangers’ EBT use, a story which Scotland’s mainstream media – football, financial and general – would not expose and would, or could, not explain.

The late Paul McConville’s “Random Thoughts on Scottish Law” often randomly turned to the RTC, allowing him to write, at his trademark terrifying length (and sometimes more) and with his trademark easy wit, on the case’s legal complexities and ramifications. His conclusions and opinions did not always match expectations. But they were expertly-informed, methodically thought-through and constructively thought-provoking.

And, much to the chagrin of the more, ahem, ‘committed’ elements of Rangers’ fanbase, Irish-based journalist Phil Mac Giolla Bhain, who broke the story seven long years ago and kept with it when mainstream journalists who had written about it thought it best, for whatever reasons, not to write about it anymore. Mac Giolla Bhain has the right, and will not be shy to take up that right, to say “I told you so” about the RTC. Because, well, he did. And he will also reference “herrenvolk hubris” at some stage. In fact, I can say that with some certainty because he has referenced it already.

These are not the only few who were “right all along.” And it is surely significant that it took a “mainstream” journalist based outside Glasgow, Alex Thomson of Channel 4 News, to call things as they are. Thomson’s incredulity on Radio Clyde on 16th April 2012, when faced with Glasgow journalists’ excuses for “missing” swathes of the Rangers story, remains the stuff of legend.

All three, however, were treated with particular disdain by Rangers “people” (as in “We are the People,” the supremacist-sounding Rangers slogan which continues to mean two-tenths of five-eighths of **** all).

The “Rangers Tax Case” blogger had to keep their identity under complete wraps for genuine fear of reprisals (just think about that for a second) from those who didn’t like the blog’s fact-based criticism of Rangers’ tax conduct. Rangers fans sought to discredit McConville and Mac Giolla Bhain as people, rather than discredit their arguments through, you know, argument. “Playing the man, not the ball,” as Mac Giolla Bhain often described it.

As a result, although they were told, they wouldn’t listen. More fool them, now. Because Rangers cheated. For years. The Supreme Court confirmed that this week. And because the club went bust even though they cheated, they will be listed as cheats forever more. So, while the Rangers Tax Case may be over, for as long as Rangers keep the benefits of that cheating, the story is not.

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