Rangers tax case ruling will have wide-ranging implications, HMRC says
Five judges unanimously dismissed an appeal by the liquidators of RFC2012, the company formerly known as Rangers Football Club.
Many more tax avoidance schemes will be targeted after Her Majesty’s Revenue and Customs (HMRC) scored a legal victory following a long-running dispute over payments made to players and staff of Rangers FC.
Five Supreme Court judges unanimously dismissed an appeal by BDO, the liquidators of RFC2012, the company formerly known as Rangers Football Club, following an earlier decision in favour of HMRC at the Court of Session in Edinburgh in November 2015.
The tax authority opened its investigation into Rangers in 2010 after about £50 million worth of payments were made to dozens of employees through employee benefit trusts (EBTs) from 2001, and the case continued after the Glasgow-based club was consigned to liquidation over an unrelated tax debt in 2012.
After suffering two tax tribunal defeats to the Murray Group, the former majority shareholder of Rangers which administered the EBT scheme, HMRC has secured a binding triumph which it says will have major consequences.
Lord Hodge and his fellow judges agreed with HMRC’s assertion the payments were taxable earnings and not loans, as contended by the club.
Many of the payments had been set out in advance in “side letters” which were separate from contracts and kept secret from the tax and football authorities.
EBTs were the subject of a legislative crackdown in 2010 but HMRC continued to pursue thousands of companies which used the schemes beforehand, with a July 2015 deadline set for firms to settle debts.
Those which did not have now been urged to come forward following the result of what was seen as a major test case.
David Richardson, director general of HMRC’s customer compliance group, said: “The unanimous decision of the Supreme Court supports our view that employment benefit trust avoidance schemes simply do not work.
Statement from David Richardson, Director General of Customer Compliance, on this morning’s Supreme Court result with regards to Rangers FC pic.twitter.com/hX5o7pV2Qe— HMRC Press Office (@HMRCpressoffice) July 5, 2017
“This decision has wide-ranging implications for other avoidance cases and we encourage anyone who’s tried to avoid tax on their earnings to now agree with us the tax owed.
“HMRC will always challenge contrived arrangements that try to deliver tax advantages never intended by Parliament.”
The outcome will not have any financial impact on the football club as it stands now, as the assets and business were transferred to a new company when RFC2012 was consigned to liquidation.
However, other creditors of the old company will see their payouts cut.
James Stephen, BDO business restructuring partner, said: “Given the significance of the matter and the support and direction received from creditors and the liquidation committee, we believe taking the case to the Supreme Court has been the correct course of action.
“We will now engage with HMRC on adjudicating its claim. Further advice and guidance will be provided to creditors in due course.”
Former Rangers chairman Sir David Murray said he was “hugely disappointed” with the verdict.