The future of Rangers, the Scottish Premier League champions, was cast into deep uncertainty yesterday when the club gave notice of its intent to go into administration.
Such a move, which Rangers have 10 days to confirm, would incur an immediate 10-point penalty and hand the title to Celtic, who currently lead the SPL by four points.
Last night Craig Whyte, the Glasgow club's owner, insisted it was the only option. With the verdict of a tax tribunal on a £49m bill imminent, the move did not come as a surprise – Whyte raised the prospect last year – but it sent shockwaves through the Scottish game.
Rangers lodged legal papers with the Court of Session in Edinburgh at lunchtime. The club expect to take 10 "working days" before deciding whether to appoint an administrator. That gives Whyte, who significantly is the club's largest secured creditor, a window in which to negotiate with HMRC. The Revenue would be the biggest loser were the club to collapse. Rangers insisted they will make "every effort until the last moment to avoid going into administration".
Whyte said: "Decisions have to be taken to safeguard the long-term survival and prosperity of the club. The harsh reality is that this moment has been a long time coming and its roots lie in decisions taken many years ago. If we do not take action now the consequences and the risks to the club are too great. In addition to the HMRC issues, it has been abundantly clear to me the club faces serious structural and financial issues.
"There is no realistic or practical alternative to our approach as HMRC has made it plain that, should we be successful in the tax tribunal decision, they will 'appeal, appeal and appeal again'. This would leave the club facing years of uncertainty."
What happens if Rangers do go into administration?
The SPL confirmed a 10-point penalty and a transfer embargo would be imposed. The club signed Daniel Cousin yesterday before news of the lawyers' visit to Edinburgh emerged. The Gabon striker will be the only new arrival at Ibrox for some time. An indication of the gathering financial storm over the blue half of Glasgow came when Rangers sold Nikica Jelavic, their top scorer, to Everton last month for a profit of just £1.5m.
How has the club ended up in this state?
With average home gates of nearly 46,000 – higher than Liverpool and Chelsea – three successive titles and European football, there ought to be optimism. But Whyte says it costs £45m a year to run a club that brings in £35m in revenue.
The tax issue is separate from the day-to-day financial troubles. The case stems from a decision by the club's previous regime – Whyte bought Rangers last year for £1 and took on £18m of debt – to use employee benefits trusts (EBTs) to pay a number of its employees, including some players. It began in 2000, during Dick Advocaat's time as manager, when the Dutchman, backed by chairman Sir David Murray's rash promise to outspend Celtic, bought lavishly – including £12m on Tore Andre Flo – as the club sought to establish itself in the Champions League. An EBT is not illegal, but HMRC insist that PAYE tax and National Insurance contributions were due on some of the salaries that players were receiving. HMRC is chasing £49m in tax and interest. A tribunal into the claim has sat and is due to give its decision by the end of the month.
What happens next?
Tellingly yesterday's club statement contained this: "The majority shareholder is prepared to provide funding on the basis it is ring-fenced from the HMRC issue."
It has become something of a game of cat and mouse between Whyte and HMRC. Administration is likely, but he has long planned for this and as preferred creditor there is a good chance he will still be in control once the club emerges from any administration period.
Whyte's running of the club has been the subject of much criticism. Last month trading in Rangers' shares was suspended by the PLUS Stock Exchange over its failure to submit independently audited accounts by the end of last year. The club has also yet to hold an AGM as required by the end of December. The stock exchange and Scottish Football Association have also asked for clarity over Whyte's admission that he had been disqualified as a director for seven years from 2000.
Last week a former Rangers chairman, Alastair Johnston, asked the government's Insolvency Service to clarify "certain financial arrangements" relating to the takeover of the club.