The Rangers Tax Case: Best of Five?

At half past seven on the evening of November 3rd, a jaunty message arrived from Her Majesty’s Revenue and Customs. A Channel 4 journalist, a long-time observer of Rangers’ various situations, was told: “Good evening, Alex, the Rangers judgment is out tomorrow.” HMRC sounded confident. We now know why.

The next day, the Court of Session ruled in their favour in the long-running “Rangers Tax Case”, overturning two previous tribunal verdicts. Between 2001 and 2010, the club paid staff, primarily players, through offshore Employee Benefit Trusts, or EBTs. HMRC claimed these payments were taxable earnings and issued an assessment for approximately £24 million. A First-Tier tax tribunal in 2012 and an Upper tax tribunal in 2014 had both largely sided with Rangers, but this latest ruling has turned a three-year reality on its head.

The judgment was ferocious in its findings, stating that a “fundamental principle was clear: If income is derived from an employee’s services… it is an emolument or earnings, and is thus assessable to income tax, even if the employee requests or agrees that it be redirected to a third party.” This, it concluded, “accords with common sense.” The court damned the previous tribunals for giving undue emphasis to the trust mechanism over the substance of the payments, calling it a mere “redirection” of taxable earnings. The case could now go to the UK Supreme Court, making it a best of five contest.

A Question of Advantage

The immediate fallout was not about tax law, but titles. Almost instantly, fans began calling for Rangers to be stripped of honours won during the EBT years, arguing that improperly-registered players conferred an unfair sporting advantage. This ran contrary to the findings of the independent Lord Nimmo-Smith Commission, set up by the Scottish Premier League in 2012. That commission, ruling while the First-Tier tribunal's decision stood, found Rangers had received no such advantage. That assumption has now been swept aside.

The Scottish mainstream media reacted with a speed suggesting considerable pre-planning. Within hours, stories appeared in the Scottish Daily Mail and Sun, citing unidentified league “sources” who claimed there was “no mechanism” for stripping titles. This was demonstrably false; the SPL had offered to drop proceedings against Rangers in 2012 in return for the club “dropping” titles, and the Nimmo-Smith Commission itself had 19 available sanctions, including the power to “withdraw or withhold the award of a title.” The media rush to close down the debate continued, with pundits dismissing the prospect as “somewhere between unlikely and definitely not,” often hiding behind the now-compromised Nimmo-Smith ruling.

The disingenuousness was palpable. Euan MacLean of the Daily Record, author of an article that once called the tax bill “phantom”, claimed the HMRC victory was “unrelated” to sporting advantage. The court’s judgment, however, directly addressed the point, noting that “if bonuses had not been paid (the footballers) might well have taken their services elsewhere.” David Murray, the former Rangers owner whose company devised the scheme, told the first tribunal it was for “acquiring better players in a more cost-effective manner than we would be able to do otherwise.” The tribunal itself concluded it “enabled the club to attract players who would not otherwise have been obtainable.” Sporting advantage.

Novel Concepts and Phantom Debates

Rangers issued a statement declaring they had “not lost the case,” and that there was “no question of any liability impacting on our Club (or) its history.” This is best translated as “the titles are ours, the tax debt isn’t.” Supporters have rallied around this theme, arguing that Lord Nimmo-Smith’s ruling on registration breaches is separate from tax liability and should stand. Others pointed to Arsenal’s historic use of offshore trusts, questioning the lack of calls for them to be stripped of their seven honours won in their “EBT years.” Of course, Arsenal paid their owed tax in full and immediately on demand.

The whataboutery reached its nadir when Matthew Lindsay of Glasgow’s Evening Times tweeted a “Serious question” asking if Hibs would be crowned 2004/05 champions, an inference about a single EBT payment made by Celtic to Juninho after he had left the club. Celtic paid the tax owed on demand in 2008. The attempt to equate one payment with hundreds made by Rangers over a decade is a novel concept indeed.

Amid the noise, the award-winning blogger who first exposed the Rangers scheme simply tweeted one word.

Vindication.

The judgment itself, in a thorough examination of tax law, also found time to address whether “Regular Pringles” had sufficient “potato flour content” to be exempt from VAT.

A Line in the Sand

Ex-players have been wheeled out to declare that titles are “won on the park” and it is “time to move on.” Former Rangers striker Derek Johnstone labelled the idea “nonsense”, adding it “will baffle a lot of people” that two tribunals can rule one way and a third, “with the same details put forward,” can go the other. This ignores that the Court of Session believed its overriding duty to justice allowed it to revisit the facts of the case, a key difference from the legally-constrained tribunals.

The current Rangers board has now attempted to dictate terms. In a statement calling for Scottish football to unite, it declared it “cannot countenance or accept any talks, attempts or actions designed to undermine what this club has achieved throughout its long history.” It insisted that “a line must be drawn now” with “no need for further SPFL consideration of court judgments or appeals.”

For now, no action should be taken. The legal process is incomplete, and the mistake made by those demanding retribution after the first tribunal ruling must not be repeated in reverse. Yet the battle lines are drawn. Rangers have until December to apply for leave to appeal to the Supreme Court.