It has recently been suggested to me quite strongly by two separate Finance Industry experts that no matter the outcomes of the forthcoming criminal trials into the sale of Rangers and the subsequent disposal of the liquidated assets, it is highly unlikely that the sale will be reversed. In fact BDO (the liquidators of Rangers) see the path of least resistance to any remedy (if guilty verdicts are returned) through the professional indemnity insurance held by organisations involved (I am choosing my words carefully here to comply with the rules surrounding the court case).
There is of course still the dispute between the owners of Sevco 5088 and Sevco Scotland to consider (although depending on the outcome of the criminal cases, that may be moot).
On the face of it, all of this is good news for TRFC and Dave King. After all, one of the main problems they have been facing is the uncertainty over the ownership of the assets, and if BDO are swinging in the direction indicated above, King and his board are free to move forward – you would think.
The recent plans to raise cash from the fans is I think a smart one, but it is still a sticking plaster applied to a gunshot wound. Rangers already have a gate income which is the envy of not just most Scottish clubs, but clubs much further afield. Their problem is their astronomical fixed costs, their dilapidated infrastructure, and possible cash outflow through the fabled ‘onerous contracts’.
Even putting in place a severe austerity package (which may be unpalatable to fans being asked to part with their cash to buy off pesky shareholders who don’t share King’s vision) does not remove the need to capitalise urgently to repair the stadium and build a squad capable of competing in Scotland. So they need to raise cash, and they need it quickly – because soft loans cannot be provided forever.
So the share issue route is the obvious way to go, and to do that effectively, a listing on an exchange is required. However our sources in the financial world don’t think it is possible that this could happen with the current regime for the following reasons (not in order of importance);
- They have absolutely no credible business plan to move forward over the next five years – only a commitment to limping on with soft loans;
- The current chairman is a convicted felon;
- Two directors of the new company were directors of the company now in liquidation;
- They have no line of credit;
- They are already in debt to the tune of at least £12m – increasing as I write;
- They are unable to repay that debt;
- There is still a nominal (even if we accept the BDO position above) doubt over the ownership of assets;
- The football team does not play in the top league – and European income isn’t coming soon;
- The company have astronomical fixed costs which are way in excess of their income.
So even if the doubt over the ownership of assets is removed, there isn’t an easily navigable route for TRFC into calmer waters.
My own conclusion is that perhaps the biggest single thing that is holding Rangers back is Dave King. I really don’t know what his motivation is. There is speculation that he has his eyes on the increasing cash-pot and diminishing creditor list at the Oldco. Some Rangers bloggers are suggesting that a land-grab play is taking place. I think the former is far more plausible than the latter, but if we take his RRM credential at face-value, it seems to me that the Rangers-minded thing for him to do would be to reverse himself out of the position he is in.
That might enable the company to raise some of the cash they need to repair the stadium, rebuild the infrastructure within the club (players, management, youth and scouting etc.).
Are King, Taylor and Park really in this so they can indefinitely fork out £10m per year? Will Taylor and Park continue to ally themselves with King if he is the impediment to inward investment that we think he is? Park will most certainly not, and my information, from sources very close to him, is that he is done.
The fractures in KingCo are beginning to appear, and King himself may come under increasing pressure to do what is best for the future of the club, which is to remove himself from the equation and allow those better placed to take it forward.
It is often speculated elsewhere that SFM is a Celtic blog, and even those who give us credit for being a much broader church than that will still insist that we are anti-Rangers, obsessed with Rangers, and out to get Rangers.
The occasional outburst of Schadenfreude from commenters aside (it IS a football forum after all guys) SFM is quite definitely not editorially anti-Rangers.
I think the evidence shows that we are nothing of the kind, and it doesn’t do Rangers any favours to conflate our position on the corrupt nature of the governance of the game with that of the Ibrox club – new or old. Where we do discuss Rangers (as we have in this article), it is with an acknowledgment that the money flying around in football makes all of our clubs vulnerable to the kind of rip-off merchants who have wandered in and out of Ibrox in the past few years.
There are many areas where the SFM consensus is unpalatable to Rangers fans. But protecting all of our clubs and their fans from mismanagement is hopefully not one of them.
Also, despite the many rivalries within the game, Rangers are an important focus (old club or new) for tens of thousands of fans. As such they are of interest to ALL of us who support football in this country. Anyway, I tend to be more obsessive about my own club – and find it rather easier to be objective about others 🙂
My own preference in moving the debate forward is to get the perspective of Rangers fans on these issues. I am ever hopeful that we can have Rangers fans engage with the blog and look for areas where we have common purpose.
Nobody at SFM wants Rangers fans to have no team to support. Nobody here wants the SFA to stay unregulated and unaccountable. Nobody at SFM wants people to make up rules they go along just for the sake of a few quid. I can’t believe that Rangers fans don’t share those values.
I agree that Rangers fans are victims of this affair to a large extent, but the culprits are quite definitely not us at SFM. They need to look closer to home to find them.
John Clark 3rd November 2015 at 11:01 pm #
‘..But are the UK courts able to act on that’
______________
Or vice-versa!
So in Nov 2012 he was ordered to hand over, amongst other things, his Ferrari. He stalled, and so the insolvency practitioner (Cloete Murray) took him back to court in Feb 2013 where he was ordered to hand it all over within 24 hours and given a 3 month sentence (suspended) to boot.
Fit and proper, indeed. Well done, Regan, you dribbling coward.
So the result of the latest stage of the Rangers Tax Case is due out tomorrow.
Does anyone who has followed this farce wait in expectation of an outcome that does justice to what is so obvious to the majority of fair-minded citizens?
I doubt many even cling to hope over expectation.
Experience to date strongly suggests yet another demonstration that our tax system is hopelessly inadequate and not fit for purpose.
I expect to be disappointed, once again, by our so-called justice system.
Further failure will only add to what is already an astonishingly long list of failures in tax, justice, journalism and administration of our sport.
I may be jaded and cynical, but I have good cause.
The Rangers Tax Case has illustrated so many times, on so many levels and in so many facets the rotting corruption upon which the Establishment feeds and protects its own.
The Charles Greens and Craig Whytes of this world, chancers that they are, are nothing compared to the be-knighted ones that really run the show in this country.
There are banana republics that would be ashamed to be so blatantly corrupt as this justice-forsaken land.
Justice would require the removal of the veneer of respectability that the SDMs, Mastertons, COs etc so desperately cling onto. It would require exposure of the corruption at the heart of all sorts of aspects of our sick society – the dodgy business deals, the backhanders with politicians and councillors, the venality of the media, and the inadequacy of our justice system.
Somehow, the fact that it has poisoned sport – sport of all things! – somehow that gets right under my skin and sickens me to the core.
I still follow my team, but it is not the same anymore. I know, beyond any rational doubt, that what I am watching is not sport in the sense I was brought up with.
I still, despite all the odds being against it, I still carry the embers of hope that justice will eventually prevail.
And I think the fact that I still manage to overcome the cynicism (though it gets harder and harder) – that comes down to the sense of fair play that was instilled in me by my parents, by my teachers, by the guys that coached us at football clubs and rugby teams.
Every time this disgraceful saga finds a new depth to plumb, all of these people that taught us the difference between right and wrong, how to behave as ordinary decent people – they are betrayed again. The truth that they instilled in us is betrayed.
So bring on whatever tomorrow has to offer. Who knows? Maybe we will be shocked by an unexpected demonstration that there are bounds to the corruption that the Establishment is prepared to paper over.
Either way, we know these people for what they are. They have nothing that I want. They are beneath contempt and thanks to RTC and TSFM and the other blogists, they can never erase the stain on their reputation.
Let’s assume the establishment leak is correct and the HMRC appeal has been lost with an announcement and much media glee on Thurday and/or Friday 12 -13 Nov
This happens to coincide with an announcement on whether CG can have his legal fees paid by RIFC The decision is thought to favour CG by legal Bampots
So it begs the question
Was there any RIFC or TRFC bad news buried in the same week as previous HMRC v Murray Group decisions?
And if so
Was it smart PR by the Board to synchronise the good news HMRC result with a bad news decision that was totally under the control of the Club?
Or
Was it rather an odd coincidence because the timing of both decisions was outwith the control of either RFC or RIFC or TRFC?
But under the control of the “Establishment”?
The MIH & RFC (IL) EBT big case is irrelevant to what’s actually happening to the Ibrox franchise at the moment.
Only the most zealous myth cult member would celebrate a move to the next tier of the appeal structure whilst the current franchisee is facing financial oblivion.
If the Sevco version suffers an insolvency event, will coming out of that via a CVA rank above or below the original RFC being slightly less insolvent than before the appeal?
Squirrels come in all sizes, but they’ll never be as large as the elephant in the room.
Zilch 3rd November 2015 at 11:37 pm #
Exactly.
http://www.bbc.co.uk/news/business-32914372
29 May 2015
“The tax avoidance scheme works by exploiting the government’s Employment Allowance which was introduced last year. The allowance enables companies to claim £2,000 off their annual employers’ National Insurance bill and was meant to encourage small businesses to take on more workers.”
Within a few months of a new allowance it is being abused.
Having given up on trying to spot Doomcaster or Regan, has anyone seen anything of El Presidente Alan McRae?
Surely now that everyone else in European football seems to be getting drawn into the Blatter web, a new face could be outspoken and make some statements in support of sporting integrity?
woodstein 4th November 2015 at 12:40 am #Zilch 3rd November 2015 at 11:37 pm #
Experience to date strongly suggests yet another demonstration that our tax system is hopelessly inadequate and not fit for purpose Exactly. http://www.bbc.co.uk/news/business-32914372 29 May 2015 “The tax avoidance scheme works by exploiting the government’s Employment Allowance which was introduced last year. The allowance enables companies to claim £2,000 off their annual employers’ National Insurance bill and was meant to encourage small businesses to take on more workers.” Within a few months of a new allowance it is being abused.
=======================
Tax doesn’t have to be taxing, but it does keep some of us in a job.
Tax gimmicks will always attract publicity, but are always doomed to failure as they are not properly integrated into the highly complex structure of the taxation system.
Politicians should be kept away from tax legislation, as it always ends in a shambles.
The best laid political tax plans will always cost more than they save unless fully worked through and that seems to be a forlorn hope now, as we see too many gimmicks and not enough proper simplification.
Barcabhoy 3rd November 2015 at 10:27 pm #Dave King has previous when it comes to contempt of court. He was found guilty in 2013 of contempt of court and sentenced to 3 months imprisonment ( suspended for 3 years)
He clearly is an individual with no respect for the law. The fact that Sons of Struth ( with their criminal founder) are such supporters of his, is hardly a surprise.
http://www.saflii.org/za/cases/ZAGPPHC/2013/68.html
Scroll to the end for the Judges verdict & Summary
17 0 Rate ThisView Comment
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Barca , my reading of that judgement is that he would only be sent to jail in the case that he did not comply with the terms of clause 3.
Can we assume that he must have complied with said clause as we would surely have known if he had served 3 years in prison ?
So therefore , the assertion that he was sentenced to 3 years suspended is not valid ?
Which would also negate the thought that the upcoming ” contempt of court ” case could result in King being sent to prison based on the South African judgement ?
Eddiegoldtop
looks to me that 36.4.3.nails him on this one.
I agree EGT, I would not have thought that being found in contempt of a completely different court would have any bearing on this judgement in SA. The fact that it is in an entirely different country would also, IMO, be in his favour.
I’d be more interested in the fact that the valuer was meant to come in and value the wine collection. Had he stocked up with the cellar he showed off to Jim White when the valuer visited, or did that stuff just get put down, AFTER, the valuation?
The Herald and Daily Record online editions ar both running huge headlines re the big tax case ruling being due today. Why do I get the impression they are also preparing articles complaining bitterly about HMRC’s conduct and that Rangers didn’t need to be liquidated?!!!!
Does 30 days count against his Non. Dom. status?
Ahead of the tax case judgement here is a wee analogy that helps me understand what is under judgement. If it can be embellished or corrected fire away. 🙂
If you think of an ebt being the vehicle by which payments were made to players, then in the case of the early DOS ebts of wee tax case fame (they had side letters too) the vehicle was a stolen car. Guilty but never charged by football for the theft, nor was the tax owed paid.
In the case of the ebts of Big Tax case fame the vehicle was the equivalent of a car borrowed until the owner dies to be returned in that event.
The first is clearly theft the other is not if the owner agreed to the loan and HMRC are arguing the tax payer is the owner and never meant a loan deal under legislation whilst RFC advocates are arguing the owner will get his car back.
yourhavingalaugh 4th November 2015 at 6:09 am # Eddiegoldtop looks to me that 36.4.3.nails him on this one.
————————————————————————-
yourhavingalaugh ,
The Important thing you are missing is the following >
” 4. In the event of the respondent failing to purge his contempt in
terms of paragraph 3 above:- “
Which basically means he could only be jailed if he does not comply with 36.3 to 36.3.6 . Which goes back to my original point that if he had not complied and he had been jailed , we absolutely would have heard of this by now .
Im assuming DCK ponied up pretty damn quickly to save himself a South African jail cell with a big strong bored lifer !
upthehoops 4th November 2015 at 7:14 am
The Herald and Daily Record online editions are both running huge headlines re the big tax case ruling being due today. Why do I get the impression they are also preparing articles complaining bitterly about HMRC’s conduct and that Rangers didn’t need to be liquidated?!!!!
———————————————————————————————————
Thank you for your emails of 12 July 2014 and 7 August 2014 to the Prime Minister about the case of HM Revenue and Customs (HMRC) and Rangers Football Club. As this area falls within the responsibility of HMRC, I have been asked to reply to you.
Whilst I cannot comment on the detail of the case, I hope the following information will be useful.
As you know, the Upper Tribunal decided on 8 July 2014 in favour of the Murray Group, who formerly included Rangers Football Club, in a case involving the use of an Employee Benefit Trust (EBT). We had argued that the tax structure was being used as a way of avoiding Income Tax and National Insurance contributions by both the employer and the employees.
We are disappointed that the Upper Tribunal has upheld the majority decision of the First Tier Tribunal, and we have applied to the court to appeal the decision at the Court of Session.
We are committed to tacking tax avoidance wherever we see it, investigating and closing down schemes that we believe do not work. Tax avoidance is about bending the tax rules to gain an advantage never intended by Parliament. Avoidance often involves contrived, artificial transactions that serve little or no purpose other than to reduce the amount of tax someone pays. Those who use avoidance schemes put additional burdens on the vast majority who pay the right amount of tax. We have been consistent in our approach to dealing with EBT schemes, and have not singled out Rangers.
If avoidance scheme users refuse to accept our position that their scheme does not work and take the case to litigation, we will continue to challenge them. We are very successful in tackling avoidance cases litigated by taxpayers, winning around 80% of cases in the tribunal and courts. In 2013-14 alone our 30 wins protected around £2.7 billion of tax.
An important principle of the UK tax system is that Ministers do not get involved in decisions about individual taxpayers. How we resolve disputes with taxpayers is set out in the published code of governance for resolving tax disputes, which is available at: http://www.hmrc.gov.uk/adr/resolve-dispute.pdf.
The code refers to the published Litigation and Settlement Strategy, which goes into more detail about the basis on which we will resolve tax disputes, including where litigation is pursued to reach a resolution. You can find details at:
http://www.hmrc.gov.uk/practitioners/lss-guidance-final.pdf.
I think it would also be helpful to clarify that the recent tax case is categorically not the reason why the club was put into liquidation. It is a matter of public record that Rangers was placed in administration by its principal shareholder and director because it was unable to pay its creditors, including HMRC. At the time of liquidation, published court papers showed that the undisputed tax that was owed by the company was approximately £21 million. This is an entirely separate issue from the amount in dispute due to the former owner of the club’s use of the EBT scheme.
You mentioned concerns that confidential information was leaked about the case. These matters were investigated by the Police Service of Scotland in conjunction with HMRC and the Police Force West of Scotland. No evidence was found that there was any leak of information from HMRC.
I hope you find this reply helpful. If you need to contact us again, please quote the reference number at the head of this email.
Yours sincerely
Steve Groves
HM Revenue and Customs
Ministerial Correspondence Unit
First Floor
Howard House
Nottingham
NG2 1AB
Up the hoops.
That spin may be put on things but RFC were liquidated because they could not pay taxes actually due ie wtc,Paye and Vat.
HMRC had their projected cash flow and it was clear that without UEFA income they were operating whilst insolvent. They need not have been in that position had they not increased the £6m reported debt in 2006 to £31m two years later through buying good players and then paying wages that depended on CL money to make them affordable.
All the BTC did was make them unsellable to honest men who wanted to run a proper business.
Someone asked if the removal of the BTC potential affected the CVA voting if DKs £20m was part of what was owed. I’m not sure which of the 25%/75% rule was necessary to achieve a CVA but I think that issue has been covered previously and did BDO not dismiss DK’S claim.
No doubt there will be another attempt at rewriting history and keep on air brushing the wtc from the scene but I’m sure SFM contributors will keep our media straight.
ps, superb post by Zilch at 11.37pm, describing perfectly my thoughts too, but in a far more eloquent way than I could hope to write.
Thanks for that auld heid. It was me who raised the king cva query. Whilst I acknowledge BDO (correctly in my opinion) threw out king’s claim I think it is almost beyond reasonable doubt (you honour!) that duff and phelps would have gladly included it. I just wondered if it was the shiny blade in waiting for the present Caesar, that was all.
On a different note I see from the record that blofeld, sorry, Mike Ashley can now add entrapment to his ever expanding cv.
The Cat NR1 4th November 2015 at 12:49 am #
‘… has anyone seen anything of El Presidente Alan McRae’
_________
To use a slightly adapted declaration from my official life of form of some decades ago ” I have not seen,heard from or received any money from ” said Presidente!
And good old lying BBC Radio Scotland in the 8.30 news summary!
McLaughlin almost choking himself in his anxiety to emphasise that the ‘new holding company that runs the club’ would not be affected…
Rangers’ AGM will be at the Clyde Auditorium on November 27.
Accounts:
King: “The Club was returned to operational and financial stability”
http://rangers.co.uk/news/headlines/rangers-international-football-club-annual-results/ …
“The forecast identifies that the group will require up to £2.5m by way of debt or equity funding by the end of season 2015/2016 in order to meet its liabilities as they fall due. Further funding will be required during the 2016/17 season, the quantum of which is dependent on future football performance and promotion to the SPFL Premiership. The forecast indicates that an initial tranche of funds will be required in December 2015.”
“EMPHASIS OF MATTER – GOING CONCERN In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures in note 1 to the financial statements concerning the Group’s ability to continue as a going concern. In order to continue operations for the next 12 months the group is dependent upon raising additional finance. Failure to secure additional funding would result in the existence of a material uncertainty which may cast significant doubt as to the Group’s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.”
Oh, can’t imagine that will be cheap….
I view it the other way John.
…equally the new holding company that runs club A also wont be affected when another clubs holding company runs up significant debt, welches on it but allows its club/brand/franchisey thing to happily snaffle and gloat over the trophies that Club A thought they were in with a shout of winning.
Good for the goose etc etc. And that’s precisely the door they’ve pushed ajar.
“The forecast identifies that the group will require up to £2.5m by way of debt or equity funding by the end of season 2015/2016 in order to meet its liabilities as they fall due. Further funding will be required during the 2016/17 season, the quantum of which is dependent on future football performance and promotion to the SPFL Premiership. The forecast indicates that an initial tranche of funds will be required in December 2015.
As a financial numpty, can someone explain at what point does this continued absolute requirement for external “funding” become trading insolvent? Or is it perfectly acceptable to simply continue to swallow vast amounts of money as in this way for as long as people are willing to do so?
Highlights from a quick read of the accounts
“Rangers International Football Club plc was incorporated in Scotland on 16 November 2012 as a public company with registration number SC437060. The address of the registered office is Ibrox Stadium, Glasgow, G51 2XD. The nature of the Group’s operations is that of a football club”
_____-
You mean it’s NOT a ‘holding company ‘simply operating a club? You mean it’s a Football club, founded in 2012?
Cannot be Rangers Football Club, founded in 18-whenever, and which is now in liquidation.
So glad that they’ve realised that.
I am not an accoontant… So…. In the PDF of the accounts….
On p60, it’s noted that payment of the fine on oldco of £250k with £150k costs was passed on as part of the deal to set up newco….
…but that newco decided it wasn’t necessary to pay it after a flurry of docs passed between them and SPFL – which DOES think it still outstanding.
(it’s like the £5m no one thinks need to be repaid to Sports Direct.)
There was to be a meeting on Oct 29/30 to address this, it says.
Have I been asleep for a week or am I Rip van Winkle?
ETA. I now see above, allyjambo mentions the lack of resolution for the above wee item. Costly…
Dear Mr Winkle.
Thank you for your recent correspondence. Don’t you worry about trifling little matters like debt repayment, just leave that to us to ignore, as indeed our debtors appear to be doing.
Yours sincerely
Neil
Edit: There is of course a serious point in that the SPFL, and for that read the other clubs else we would have heard about the cosy get together last week, have clearly indicated to RFC* that the fee should be paid back whenever funds allow. Now just when do you think that’ll be in a business with a going concern notice, publicising a need for £2.5m (yeah right) in 26 days time and continuing annual losses over £7m?
Quite simply an appalling set of financial results.
But with the appeal result from the BTC due out today, guess what will be dominating the headlines, regardless of the outcome? (Although if – as I suspect – it will need a further appeal from HMRC, then the headlines in the media will actually be positive for “Rangers” despite these results.)
Aren’t some of the loans given by directors due to be repaid soon?
John Clark 4th November 2015 at 10:11 am #You mean it’s NOT a ‘holding company ‘simply operating a club? You mean it’s a Football club, founded in 2012?Cannot be Rangers Football Club, founded in 18-whenever, and which is now in liquidation.So glad that they’ve realised that.
=====================
I refer m’learned friend to page 11 of the Annual Report (Strategic Report):
“Rangers Football Club, formed in Scotland in 1872, is one of the world’s most successful clubs, having won 54 League titles, 33 Scottish Cups, 27 League Cups and the European Cup Winners’ Cup in 1972…”
Have they missed out an “IL” or a “2012” in that statement?
Smugas 4th November 2015 at 10:17 am #
‘..SPFL, and for that read the other clubs else we would have heard about the cosy get together last week, have clearly indicated to RFC* that the fee should be paid back whenever funds allow..’
______
A nice little, interest free loan (maybe even more ‘assured’ than the other loans about which the Board have ‘assurances’.
A disgraceful abuse of office and an affront to the rest of Football, and possibly actionable if even one other Club was prepared to raise an action!
Resolution 11 in the AGM notice seems to be looking to prevent MASH from voting at future GMs.
11. “THAT: the Articles of Association of the Company, be and are hereby amended by inserting a new Article 15.3 as follows:-
“No member shall be entitled to vote at any general meeting or at any separate meeting of the holders of any class of any shares in the Company, either in person or by proxy, in respect of any shares held by him (whether absolutely or as a trustee, either alone or in conjunction with one or more associates or solely through an associate or associates (even where such person has no formal interest)) if he is involved in any capacity whatsoever in the management or administration of a Club, or has any power whatsoever to influence the management or administration of a Club and the Directors of the Company shall be entitled at their sole discretion and without issuing reasons therefor to determine whether or not a member does have such involvement in or power to influence a Club.For the purposes of this Article “Club” shall mean any football club in membership of a national association which is in membership with FIFA other than Rangers Football Club.”
JJ, the first tranche of loans are due to be repaid in December.
Well done, Mr Ghosh!
easyJambo 4th November 2015 at 10:28 am #…
EJ, do you think they are deliberately trying to goad Ashley into killing RIFC? I can’t begin to understand why the board would go out of their way to anger someone who actually does have the power to kill them off for good.
Advocate General for Scotland v Murray Group Holdings and others
A scheme involving payments to various trusts set up in respect of executives and footballers employed by the former Rangers Football Club amounted to “a mere redirection of emoluments or earnings” and was accordingly “subject to income tax”.
Judges in the Inner House of the Court of Session allowed an appeal by the Advocate General for Scotland, acting on behalf of Her Majesty’s Revenue and Customs (HMRC), against a decision of the Upper Tribunal in relation to tax assessments made on Murray Group Holdings and other members of the Murray Group of companies, including RFC 2012 PLC.
The Lord Justice Clerk, Lord Carloway, sitting with Lord Menzies and Lord Drummond Young, heard that in the tax years from 2001/02 to 2008/09 the companies entered into a series of transactions as part of a scheme designed to avoid the payment of income tax and National Insurance contributions (NICs) in respect of their employees, which resulted in assessments by Her Majesty’s Revenue and Customs to income tax under the Pay As You Earn (PAYE) system and corresponding NICs.
The companies challenged those assessments before the First-tier Tribunal, which upheld the appeal by a majority of two-to-one. An appeal by HMRC to the Upper Tribunal was refused in August 2014, but permission to appeal to the Court of Session was granted.
The scheme involved a cash payment into an Employees’ Remuneration Trust (the Principal Trust), and the trustee of the Principal Trust then paid the same amount into a sub-trust for the benefit of the employee and his family. The trustee of the sub-trust then advanced funds on loan to the employee in question.
The First-tier Tribunal held that the trustee of the Principal Trust had a “genuine discretion” as to how to apply the funds advanced to it, thus the benefit enjoyed by the employee and his family once the funds were resettled into the sub-trust resulted from the exercise of a “discretionary power” by the trustee of the sub-trust.
Such a payment was not a payment of emoluments or earnings, and was therefore not subject to income tax, the First-tier Tribunal ruled.
However, HMRC contended that the cash payment made by the employing company to the trustee of the Principal Trust was in consideration of services by the employee, and thus had been “earned” by the employee.
Therefore, the scheme amounted to “a mere redirection of earnings which did not remove the liability of employees to income tax”, it was argued.
The court concluded that the argument by HMRC was correct, and accordingly allowed the appeal on that ground.
The judges observed that the “fundamental principle” that emerged from previous cases was clear: “if income is derived from an employee’s services qua (in their capacity as) employee, 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”.
Delivering the opinion of the court, Lord Drummond Young said: “That accords with common sense. If the law were otherwise, an employee could readily avoid tax by redirecting income to members of his family to meet outgoings that he would normally pay: for example to a trust for his wife…or to trustees to pay for his children’s education or the outgoings on the family home…The funds are ultimately derived as consideration for the employee’s services, and on that basis they are properly to be considered emoluments or earnings.”
In relation to employees other than footballers, the “true nature” of the individual transactions was that bonuses were paid into the trusts on the basis of the work performance of the employee in question, and the profitability of his employing company.
“On the foregoing basis, we are of opinion that the sums received by the trustee of the Principal Trust and in due course by the trustees of the sub-trusts amounted to a mere redirection of income and thus constituted emoluments or earnings of the employees in question,” Lord Drummond Young said.
In relation to footballers, when a contract of employment was concluded, an additional side-letter provided for a discretionary trust payment and the amount of any bonus was typically negotiated by the footballer’s agent as part of his overall responsibility for securing “proper remuneration” for the player’s services.
Lord Drummond Young continued: “It seems to us to be self-evident that the obligations in the side-letter were part of the employee’s employment package, and provided him with additional remuneration. They were negotiated as part of the total employment package…Once it is accepted that the bonus payments represented consideration for a footballer’s services qua employee, it inevitably follows that those payments represented emoluments or earnings of the footballer in question.
“Furthermore, so far as the footballers are concerned, at least, it seems to us that if bonuses had not been paid they might well have taken their services elsewhere. We realise that the fifth respondent [RFC 2012] was in, potentially, a difficult financial position, competing for good players in an international market where other countries may not have the same rigorous approach to taxation as the United Kingdom. Nevertheless, the law is clear: the payments made in respect of footballers were in our view derived from their employment and thus the payments were emoluments or earnings.”
He added: “We accordingly conclude that the primary argument presented for HMRC is correct: the payments made by the respondents to the Trustee of the Principal Trust in respect of employees were emoluments or earnings and are accordingly subject to income tax. Furthermore, those payments were made at the time of payment to the trustee of the Principal Trust, with the result that the obligation to deduct tax under the PAYE system fell on the employer who made such a payment.”
Crikey! 🙂
Isnt there a terrible (and I use the word loosely, sorry Ryan) irony that the appeal verdict is virtually a cut and paste job from Heidi Poon’s initial finding.
As always I like to keep going back to the numbers of the oldco.
In 2010
Turnover £56,287m
Net Operating Costs £43,856m
Staff Costs £28,199m (66 Players and 190 other staff)
other operating costs £15,723
Latest accounts
Turnover £16,470
Net Operating Costs £26,804
Staff Costs £13,290 (52 Players =£6.2m and 106 other staff)
other operating costs £13,514.
Therefore from the SDM era around £2.2m has been trimmed off the operating costs (ex staff costs) and clearly the player wage bill has dropped significantly as has the number of backroom and office staff.
I can’t see how much more fat can be trimmed so suspect that around £13m is needed every year straight of the bat just to keep the lights on if the existing operation of Ibrox , Murray Park etc is to continue.
That takes care of season ticket income even if Ibrox was packed.
Therefore it is all the other income streams that need to pay for the staff and player costs which as we can see has also been trimmed to the bone at around another £13m with £6m being used for a team of journeymen and loanees.
You can see why DCK wants as much from the retail cash as he can because without it that £30m war chest is going to have to be opened soon to replenish a first team squad of which 50% are out of contract come January and the end of the season.
With the inter business debt of £18m, the outstanding loans, the required loans to get to the end of this season and the ongoing annual losses, exactly how much is going to be available for Warburton?
Hearts have shown you can get to second in the Premiership on a fairly tight budget but a lot more cash is required if the plan is for a ultra quick challenge to Celtic and make headway on the continent to bag Euro cash.
Given Celtic are looking like running out of high return ‘moneyball’ sell on players the future for all of Scottish football is going to have to be a ‘grow your own’ approach.
Structural deficit in the region of 10 million per annum or 60% of turnover is not sustainable. If 80% of turnover goes to wages and the loss is £10m fixed costs seem to be about £13 million
A large implosion seems likely the buttons will push themselves…sustainability would not be at a level acceptable to the followers perhaps somewhere between St Johnstone and Aberdeen financially.
This feels something like the latter days of the Warsaw bloc with two superpowers until all at once there was only one…
Big Pink 4th November 2015 at 11:00 am #HMRC Successful in appeal
………………………………
Pithy!
Are you hoping to start a trend….?
Thank you RTC for all your original work.
I’m just away now to find my old chapeau, which has been lost somewhere down the back of the settee for a while.
Common sense…who would have thought it?
I am surprised by today’s judgement. I really thought it would go all the way before “common sense” prevailed and the law was applied.
I get the feeling that the Lords thought that it should never have got to this stage given the facts.
The following will impact the payout to the other Creditors. The EBT bill will be added to the BDO list and pennies in the pound will fall.
Dr Poon’s dissenting opinion in the FTTT has been vindicated. She destroyed the majority opinion with reasoned argument and facts. Well worth a read is you want to see why the court allowed the appeal.
bfbpuzzled 4th November 2015 at 10:57 am
===========================
Indeed
The deficit has been c£10m for as long as I can remember. From a quick look at the account the “operating loss” this year (to June 2015) was c£9.9m.
The bottom line (pun intended) is that for years Rangers operated on the basis of decent European income, as soon as they didn’t have that for a couple of years the whole thing fell apart.
In other considerations, failing to pay millions of pounds in tax probably helped prop up the business as well, but that’s another story.
As I have said before, I really don’t see where they go from here. Even with additional season ticket sales of say 10,000 , at an average price of £237 that only covers say £2.5m. Add a further matchday sales of the same again and you still aren’t even breaking even. That’s assuming the feel good factor continues and people keep turning up.
Who is going to lend money to this business, on an ongoing basis.
If I’m hearing correctly and HMRC won their appeal them the LNS Decision must be set aside.
It was based on legality of ebts but as has been pointed out by SFM to SPL lawyers, that decision was only possible because of evidence kept from them.
If SPFL try to say LNS cannot be revisited because of some Brysonesque interpretation then their league is screwed. LNS was always a sham. It should have waited until legality of ebts established.
Got it wrong in any case, but has provided an argument that if no sporting advantage was gained by use of legal ebts then it sure as hell must have been if illegal ones used.
This looks like a snooker by the SFA and whoever decided not to mention true nature of wtc ebts to LNS. Wosshisname again?
They had me at
“…the former Rangers Football Club…”.
Can someone please send some counselors down to Govan quickly to deal with the sudden onset of an identity crisis.
Not so long people were seem taking to the streets shouting ‘We’ve won, We’ve won – told you we weren’t cheating’.
However as of this morning figures dressed in red white an blue were seen scurrying into the shadows to avoid serious questions and posting comments on the internet such as ‘Nowt to do with us now’, ‘Its a holding company issue’, ‘The football authorities saw nothing wrong it in, so thats alright then’.
Lets just hope SDM throws in the towel to stop the taxpayer having to fork out for a final judgement in the UK Supreme Court.
Given the possibility of a further appeal it is perhaps a bit premature but surely pressure must be put upon the SFA and the SPFL to review the situation.
That is the type of thing the SFM should be getting involved in.
Jings and crivvens. Justice and common sense ur no deid after all.
Were the dodgy accounts released to coincide with this? Good day to bury bad news under bad news?
Bravo RTC, ye can light that cigar noo — a few years late 😉
Danish Pastry 4th November 2015 at 11:23 am #Jings and crivvens. Justice and common sense ur no deid after all.Were the dodgy accounts released to coincide with this? Good day to bury bad news under bad news?
Bravo RTC, ye can light that cigar noo — a few years late ?
http://scottishsquirrels.org.uk/squirrel-sightings/
Even if ‘they’ try to claim that the LNS verdict was and is irreversible (and to be honest for the spontaneously emotional debate over titles I’m sure they will), there is still no reason why ‘they’ should remain anywhere near the feckin’ place.
Never was any reason in fact.
It may be worth bearing in mind (another pun intended) that BDO have the right to request an appeal to the Supreme Court as I understand it.
It will be a matter for them to decide
a, Is it in the best interests of the creditors to do that, considering what it would cost and
b, How likely would they be to succeed.
The one produced today. Futbal was of “the dead in the road” variety.
Oh, to be a fly on the wall around the editorial desks of the papers after the EBT Appeal ruling!!!
Can just imagine the conversation…What line to take? What did we say before?
Scottish judges men of the highest calibre with integrity beyond challenge. Hmmmm bloody difficult to get out of that one.We’ll need to go back to McCoist and SDM for their position now. Well Ally has commentating duties and the Murray group has been liquidated so no much to point in doing that.What about a wee word with the SPFL and the SFA. Nah, we all know they’re numptiesThe club did not need to die……merde….why did we say that?Was a massive front page splash. Can we move to the sport pages this time?Wonder what Peter Lawwell thinks since he’s on the professional game board. What idiot suggested that?Should we poll other club’s chairmen for their views? No, nothing to do with them. This is Rangers business only.Wonder what effect this ruling would have had on LNS?Shall we ask Sandy Bryson or maybe even the world’s greatest ever administrator and nicest guy?
Office junior…..hey, boss I know. The company that ran the club have been liquidated, the assets and titles have been bought by a new company and no money will be returned to the revenue so why are we even covering it?The BBC Radio Scotland News at 11:00 just announced there is no effect on the new club….sorry, club.
Editor….what are you doing making coffees? The laptop’s over there. Get typing.Keith, black, two sugars please.
Hearts accounts have also been published today. Turnover was up by 7% to £7.02M despite being in the championship. As projected the operating loss was £681K, but that was before the club received £1.47M from Foundation of Hearts.
The current year is looking very positive with increased revenue from STs, Sponsorship and SPFL prize money to come.
The loan to Ann Budge will start being repaid in May next year.
The AGM is expected to reveal plans to replace the old and increasingly decrepit Main Stand.
I will now have to go back to buying papers over the next few days to keep for posterity,the scribblings from Keef and co are going to be laughing policeman stuff for ever and a day,just imagine it will be broken down into small 2 or 3 liners from way back replying with the same from today onwards, oh my sides,nurse.
“Furthermore, so far as the footballers are concerned, at least, it seems to us that if bonuses had not been paid they might well have taken their services elsewhere”
Sounds very much like a sporting advantage to me.
The full decision is now available at:
http://www.scotcourts.gov.uk/search-judgments/judgment?id=8213f5a6-8980-69d2-b500-ff0000d74aa7
Conclusion
[92] For the foregoing reasons we will accordingly allow HMRC’s appeal on the first ground advanced by them. On that basis we will answer the fourth question in the appeal in the affirmative, and hold that the First-tier Tribunal erred in allowing the original appeal and that the Upper Tribunal erred in refusing the appeal before it. The other questions in the appeal do not therefore arise. The assessments to PAYE have been correctly made, for the reasons already discussed. On that basis we will recall the orders of the First-tier and Upper Tribunals and affirm the determinations appealed against, including that relating to PAYE, with the exception of the determinations and decisions concerning Sir David Murray in relation to the Bel Azur property transaction, which is conceded by HMRC. We will reserve the question of expenses in view of the history of the appeals.
2-1 to the Hibees
Dodgy accounts
HMRC win appeal
9th December date announced for Ashley v King contempt court case
What next? Some English club comes in and tempts the wearer of the magic hat back south!!
Ah, no, but you see, until they actually went to somewhere else, which they didn’t, then no advantage was attained over and above the position vis a vis had they not not been there which because they didn’t go they did, or didn’t, if you see what I mean.
Glad to help
S Bryson.
Does this prove the existence of ghosts? I recall that there was a Phantom tax bill in the Record recently
This is going to be entertaining…
Oh dear
its bonfire night at Glasgow Green tonight,how will the crowds know what will be real fireworks on display when there will be a similar sighting over Govan way,questions should be asked about the timings of both events,the last time a euro game at Celtic Park coincided with the 5th the display on the Green was moved forward a day,in the words of a famous Gardener,we should be told.
Homunculus 4th November 2015 at 11:31 am #It may be worth bearing in mind (another pun intended) that BDO have the right to request an appeal to the Supreme Court as I understand it.
It will be a matter for them to decide
a, Is it in the best interests of the creditors to do that, considering what it would cost and
b, How likely would they be to succeed.
__________________________________________________________
As I see it HMRC are far and away the biggest creditor now so difficult to see how
‘a’ would apply and as to ‘b’ the latest verdict seems to fall just short of calling the two judges
in the original FTTT incompetent.
wottpi,
Small matter of Green and his VERY expensive legal team in court first!
We will now see articles and, comments asking why this was allowed to continue, questioning the costs, was it worth it?
In my opinion it was, and is. This part of the document linked to below is why.
Issue
https://www.gov.uk/government/publications/2010-to-2015-government-policy-tax-evasion-and-avoidance/2010-to-2015-government-policy-tax-evasion-and-avoidance
The UK Government has committed £1 billion to ensure that tax evasion and avoidance are investigated and challenged for as long as it takes.
What is the word again, deterrent.
“a thing that discourages or is intended to discourage someone from doing something”
Lastly, Sir David Edward Murray, on the 4th July 2007 when you were receiving your honour, it was being given by the Queen, who in 1992 volunteered to pay income tax and capital gains tax, and since 1993 her personal income has been taxable as for any other taxpayer.
Hallelujah!
Is all I have to say at this moment as I lie by the hotel pool in Sharm! Oh, and God bless Heidi Poon.
Time for some title stripping methinks. And not forgetting SIR David Murray’s
On “Phantom Tax Bills”, from 2012.
http://www.dailyrecord.co.uk/sport/football/football-news/rangers-could-owed-tens-millions-1449760
Rangers could be owed tens of millions in damages over phantom tax bill, says ex-Ibrox director Paul Murray
…
And he believes they may well discover grounds on which lawyers could claw back in excess of £50m in lost revenue and damages.
…
While there is still the UK Supreme Court option is there any possibility of the individuals who benefited from the EBTs being pursued for unpaid tax on their ‘newly established earnings’?
If so there will be a hell of a lot of squeeky bums out there!!
Found this tangentially relevant “Ship of Theseus” piece in the Quora Digest:
Q: What is the life expectancy of the Empire State Building?
A: Well, you’ve asked the right person. My company just finished some work at the foundation. I have been up and down that place, I know it well.
The Empire State Building, and buildings like it, will last as long as there exists a civilization capable of maintaining it and willing to do so. Every component, every steel beam, brick, and Indiana Limestone block can be individually repaired or replaced as needed, and many already have been.
The elevators upgrade was very recently completed. The second time. In 1966 they went from manual to automatic operators. All the exterior lights were recently replaced with a new automated LED system. All the windows and the air conditioners were also replaced.
Of course there is a philosophical side to the question. If every part is replaced, is it still the same thing?
I say, yes. “Continuity of Identity”.
I had intended to do another Podcast on Friday to review the week and look forward to the weekend. Given the developments this morning on the BTC front, I think it even more important to do that. If anyone would like to join us by phone on the podcast, please let me know – otherwise I will probably doorstep someone 🙂
Jackie McNamara and Sid Donnelly appointed as York City management team.