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Tax decision hangs over Rangers - update

8th Feb 2012
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Rangers Football Club could be facing administration if it loses an appeal against a £49m assessment for liabilities on alleged disguised payments to players and the behind the scenes troubles are being blamed for a slump in the first team’s performance.

After being dumped out of the William Hill Scottish Cup in a 2-0 defeat to Dundee United on Monday, manager Ally McCoist commented, “The uncertainty regarding this tax issue is the biggest problem we have, whether it’s management, players or fans.”

The £49m tax case around the use of an Employee Benefit Trust (EBT) to pay first team players was the trigger for more than a year of financial turmoil since chairman Craig Whyte’s Tixway UK Ltd gained control of the club in May 2010.

The holding company delayed publication of its full accounts from September 2010 to April 2011, and postponed its AGM until the accounts are finalised. The signing-off of the accounts, in turn, is being delayed until the potential liabilities from the EBT case are known.

When Whyte took over, Rangers had a debt of £18m at Lloyds Bank. Finance was acquired against season ticket sales to pay off that liability, but Scottish newspapers report that HMRC is now investigating whether a further £5m in VAT is due against the £24.4m raised through the deal with Ticketus.

Whyte insisted the Ticketus deal was normal practice for clubs: “The suggestion that the Rangers takeover was funded through financing arrangements on season tickets is categorically untrue,” said a Whyte spokesperson. “Rangers FC is no different in that it has a working capital facility with Ticketus, as have many, many other clubs. This facility was in place at Ibrox long before the takeover.”

Whyte was also said to have contingency plans in place if the HMRC tax case goes against Rangers, but no further details were offered. 

The latest disclosures came as BBC Scotland uncovered a seven-year director disqualification Whyte he was given in June 2000 following the collapse of his previous company Vital UK, which owed creditors about £400,000. 

Replies (3)

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By Quizmaster12345678899
11th Feb 2012 05:08

Who wrote this nonsense: is this a professional journal or schoolboy gossip column?

There is no football club called "Glasgow" Rangers Football Club ..... have al look at the club badge you have printed.

You say 45 million in opening but then report 49 million further on?

Who cares about the team's form? It's not been at all bad in the 4 years up to now though

How can the BBC "uncover" a matter that is in the public record?

Do you ave anything to say on the technicality / tax issues that one may be interested in? As you point out reading Scottish rags would provide all that you have regurgitated here.

Thanks (1)
John Stokdyk, AccountingWEB head of insight
By John Stokdyk
14th Feb 2012 10:47

I did...

Thanks for the feedback Quizmaster. I've corrected the numerical discrepancy in the text, and removed the "Glasgow" from the introductory sentence. I'm sorry if have traduced the brand name and great tradition of the club, but as many of our members are English and don't all follow football, I felt attaching the geographical identifier was justified, but have now recanted.

As mentioned, we don't do a lot of football coverage (although it has been hard to avoid in recent weeks), but the potential administration of a major club and its involvement in a complex tax tribunal (for which we're awaiting the result as breathlessly as many others) does merit coverage on AccountingWEB. While the issue has been simmering up to a boil for some time, I took notice of the story when Ally McCoist's comments appeared on the radio news - and if the team manager is talking about the tribunal and related issues, that justifies inclusion within the article.

I'm sorry we have not covered this story is as much detail as you would have wished, but will try to up our game for what looks like it is going to be a long-running saga.

Thanks (0)
John Stokdyk, AccountingWEB head of insight
By John Stokdyk
14th Feb 2012 12:40

Update: Notice of intention to appoint administrators filed

Rangers filed a notice of intention to appoint an administrator with the Court of Session in Edinburgh on Monday, the Herald reported, giving the club 10 days’ breathing space before an administrator is formally appointed.

According to a Q&A on the Rangers website, a notice of intention is not administration and the club will continue to trade and host matches as normal while discussions continue with HMRC to explore alternatives to administration.

In a video on the site’s home page, Craig Whyte admitted it was a “bad day for fans” but as talks continue with HMRC it was the best way forward. Any other business would have been in administration by now and Rangers will come out a “fitter, stronger” business, he said.

From explanations in the Q&A, it appears that Whyte is trying to enlist fan sentiment in his negotiations with HMRC.

“Even if Rangers wins the tribunal, HMRC has made it plain that they will ‘appeal, appeal and appeal’ the decision. The practical effect of this will be to plunge the club into years of ongoing uncertainty. It would also mean the Club having to pay immediately a range of liabilities to HMRC. If we wait until the outcome of the tax tribunal, the risk to Rangers of being weighed down with an unacceptable financial burden and years of uncertainty is just too great. It would be counter-productive and in the longer term would jeopardise the club's future both on and off the field,” the club argued.

If HMRC wins the case, it continued, the uncertainty awaiting an outcome of any appeal would be “too much to bear”. The Club would have to pay the liability - which could be substantially more than the £50m previously reported - which would only be returned if the appeal was successful.

“If HMRC were to strike a manageable and mutually acceptable agreement with the Club, even at this late stage, that would safeguard the future well-being of Rangers, without any insolvency process,” the Q&A said.

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