A first-tier tribunal has ruled that payments made to players and staff at Rangers Football Club in a contentious tax scheme were not illegal.
The corporate entity that formerly housed Rangers, which is now in liquidation, had the scheme in place between 2001 and 2010 to pay £47.65m to players and staff. It argued that the payments were loans rather than actual earnings and not subject to tax.
Following a challenge from HMRC the club appealed its use of Employee Benefit Trusts (EBTs), arguing that the payments were loans which can be repaid.
The decision was not unanimous with one of the three members of the tribunal dissenting from the verdict.
The ruling [TC02372] said: “The majority view reflects the argument that the controversial monies received by the employees were not paid to them as their absolute entitlement. The legal effect of the trust/loan structure is sufficient to preclude this. Thus the payments are loans, not earnings, and so are recoverable from the employee or his estate."
HMRC is now considering an appeal.
In May 2011 Craig Whyte bought the club for £1 and eight months later placed Rangers in administration after running up PAYE and VAT debts to HMRC amounting to £9m.
Rangers then went into liquidation in June after it emerged that HMRC was owed £21m by the club and was officially placed in liquidation at the Court of Session in Edinburgh in October.
Former Rangers chairman Alastair Johnston claimed last night that the club would not have gone out of business if the verdict of the tribunal had been known earlier.
He said: “If you wind the clock back to the alternatives that the bank [Lloyds] and Murray Holdings had with respect to alternatives, the big hang-up was the contingent liability with this massive tax liability hanging over our heads.”
Sir David Murray’s company, Murray International Holdings (MIH), owner of the Ibrox club at the time of the payments, welcomed the verdict:
“While MIH has at all times respected the privacy of the tax tribunal proceedings, a substantial quantity of confidential information relating to the case has become available for public consumption, stimulating considerable discussion and often ill-informed debate.
“This has been wholly inappropriate and outwith the fundamental principles of natural justice. We therefore formally request that the relevant authorities investigate how these sensitive details have been released so widely,” a statement from MIH said.
HMRC said it was disappointed to have lost at this stage of the court process: "The decision was not unanimous and the diligence of HMRC investigators was acknowledged by the whole tribunal.
"HMRC is committed to tackling avoidance and it is right that we challenge the type of avoidance seen in this case," the spokesperson said.
The liquidators, BDO, have also said they are reviewing the tribunal's decision closely so as to determine the impact on the liquidation.