The long 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."