Rangers wins employee benefit trust appeal

The long-running tax dispute over Rangers Football Club's use of employee benefit trusts is set to continue after HMRC lost an upper tier tribunal appeal for the payments to players to be taxed as wages.

However some of the issues arising were referred back to the original tribunal.

In 2012, the lower tribunal ruled in favour of the Murray Group, which had argued that its £49m in payments weren’t subject to tax as they weren’t wages.

Murray Group, which controlled Rangers until the club went into administration in 2011, said that the payments were loans.

The company created an employee remuneration trust in 2002 that created sub-trusts for more than 100 footballers contracted with the club over the next 10 years.

The club would put a tax-free sum into each trust, for which the players would be given powers as “protectors” similar to those of trustees, but without giving them title to the trust assets or any absolute benefical rights.

The employees would write a letter of wishes (naming family members who would benefit upon their death, to exclude the assets from inheritance tax) and a loan application on their own behalf. The loans extended for up to 10 years, and equated roughly to the amounts they might have earned net of PAYE.

The terms of these arrangements were recorded separately from the players’ employment contracts in “side letters” that were not reported to the Scottish Football Association

The upper tribunal  judges were exasperated by some of the apparent short cuts in the way trustees administered the loans, calling the senior official’s attitude “casual and even lax”. But that did not stop them ruling that the trust structures and loans were not shams.

The appeal upheld that the lower tribunal verdict but said that some payments will be re-examined by the original tribunal, including termination and "guaranteed bonus" payments.

Tribunal judge Lord Doherty said in his judgement: "I shall remit the case to the [first-tier tribunal] with a direction to allow the taxpayers’ appeals against the assessments relating to the payments to the sub-trusts of Sir David Murray, his sons, Mr McClelland and Mr MacMillan; to proceed as accords in relation to the termination payments, the payments in respect of guaranteed bonuses, and any related questions of grossing up. Standing my findings and my disposal, the remit should be to the FTT as originally constituted. I reserve meantime all questions of expenses."

In 2011, Rangers went into in administration and then liquidation, owing HMRC £21m in taxes. 
Comments

But I thought HMRC "always    3 thanks

Cynical_Templar | | Permalink

But I thought HMRC "always won" their cases against avoidance schemes?  Isn't that why the APN rules have come in?

APNs

Justin Bryant | | Permalink

If HMRC don't appeal, it may be that HMRC do not send APNs to EBT/EFRBS clients (as it would make HMRC look a bit odd if they did in my view). HMRC also recently lost in CA re UBS and Deutsche Bank.

 

ChrisMartin's picture

Interesting

ChrisMartin | | Permalink

It would be interesting to know how many EBT cases are within the overall "backlog" that we are hearing about. I bet it's a fair chunk of the total, both in volume and value of tax at issue. There was a huge increase in EBT take-up from the mid-2000s particularly amongst clients of the accountancy network fraternity. The Rangers case must be causing HMRC a PR headache - how do they include similar EBT cases on the APN list in light of this and earlier cases without looking like they're jumping the gun somewhat? But if they're not included, what effect does this have on the perception and reality of their "get-tough" approach? 

Appeal rights

Cynical_Templar | | Permalink

But if they do include them in the APNs, how can affected taxpayers appeal?  Assumed there is a DOTAS number and an open appeal, they can raise an APN regardless can't they?

I'd be surprised if this didn    1 thanks

Tromdo | | Permalink

I'd be surprised if this didn't end up in the Supreme Court. Of course, if we vote for independence, that would throw a spanner in the works.  Then it would come down to which school the judges went to.  (I don't expect non Scots to understand the allusion.)

0109461's picture

EBTs

0109461 | | Permalink

I suspect that the follower notices will now be put on the back burner too ! HMRC have may have dropped a clangger on this one !

The allusion

wot | | Permalink

I'm half Scot and I don't understand.

billgilcom's picture

Openness and Fairness

billgilcom | | Permalink

Openness and Fairness will demand (hopefully) that taxpayers will be entitled to issue follower notices to HMRC after this appeal is heard. And of course until any decision is reviewed by a higher court the decision in Rangers EBT should be applied in settling all EBT's at the present time. Ok you can dream!!!!  Maybe I could be recommended as a FTT judge after the September referendum for 2016 as I went to the right school - for the interests of the public being served.

carroccio1958's picture

Oh yes we do ....

carroccio1958 | | Permalink

.....understsnd the allusion all too well Tromdo !

Shades of Paisley and Adams brvore the Good Friday Agreement ??

explain please

geoffwolf | | Permalink

If the payments were loans why are they not repayable to the liquidated company?

geoffwolf

Justin Bryant | | Permalink

They were loans from an EBT, not the employing company (it would not be a very good scheme otherwise!).

The Allusion

howlin wolf | | Permalink

For the benefit of non Scots, people in the West of Scotland are mostly bigoted, sectaranist idiots living in the great old days of Orange parades and celebrating outdated religious beliefs. You either went to a protestant school or a catholic school and you NEVER mixed with each other. Hopefully they may eventually crawl into the 21st century sometime soon. If the judges went to a protestant school Rangers will win the appeal.

There are some famous barristers with moustaches who love to sign sectarian songs and act as bigots. Unfortunately it is not an act for them, it is reality.

School    1 thanks

johnwayne2010 | | Permalink

howlin wolf wrote:

If the judges went to a protestant school Rangers will win the appeal.

Lord Doherty (Raymond Joseph Doherty) went to St. Mungo's Primary School in Alloa and St. Joseph's College, Dumfries - so it kind of flies in the face of your theory about which school a Judge went to whether Rangers win or lose the appeal.

What should be looked in to was the amount of information that was leaked from HMRC to the Rangers Tax Case blog and to BBC Scotland.

HMRC need to clear their name !

Aln B | | Permalink

howlin wolf wrote:

For the benefit of non Scots, people in the West of Scotland are mostly bigoted, sectaranist idiots living in the great old days of Orange parades and celebrating outdated religious beliefs. You either went to a protestant school or a catholic school and you NEVER mixed with each other. Hopefully they may eventually crawl into the 21st century sometime soon. If the judges went to a protestant school Rangers will win the appeal.

There are some famous barristers with moustaches who love to sign sectarian songs and act as bigots. Unfortunately it is not an act for them, it is reality.

What an amazingly biased statement -- one certainly not worthy of this site.

As noted above, the UTT judge went to a "Catholic school", which rather blows that entire sectarian comment out of the water.

Oh, and there hasn't been such a thing as a "Protestant school" in Scotland for well over a hundred years.  Non-Catholic schools are non-denominational, catering to every religion.

Sectarian rubbish aside, the entire escapade against Rangers' previous holding company (the "oldco") really is beginning to smell a bit now.  There's no chance of winning this.  EBT schemes were/are fairly unique in their set=ups, so there's really little chance of an over-arching "precedent" covering them all. 

And the issue of the leaked documents persists -- in the context of recent HMRC thefts, frauds and convictions for corruption (not to mention Tiberius's assessments), there HAS to be an investigation into HMRC's handling of this case -- a case brought against a club in such a vindictive and vexatious manner that it drove the holding company just about out of existence, even although all the voices raised at the time pointed out the likely criminality of the takeover process.

So ... a club and company taken over in a manner that was widely reported to be criminal, HMRC driving the oldco into the ground for no benefits to itself or others (??), and the suspicious smell of corruption wafting yet again from the HMRC workplace.

Oh dear.  Everything really does point to this having been a witch-hunt, for the most dubious of motives.

Flabergasted    1 thanks

Myshkin | | Permalink

I can't believe this decision.  This means we can all be "paid" by loans with a nod and a wink that we don't need to repay them.  Ok there is a bit of paperwork to do but, hey, lets get on with it.

I cannot beleive it

AndrewV12 | | Permalink

This is nuts, how can HMRC be so dumb to allow this to happen, Portsmouth did something similar and also won, its amazing the Directors etc of rangers run the club in the ground, pay themselves a fortune, leaving HMRC to miss out on all this money thats floating around in football.

 

HMRC could not even prove Portsmouth players were employed by the club, something to do with image rights.

 

Mind you Gordon Strachen recently advised there are no morals in football.