TRS: Rangers, Hearts and the Case of Wee Thistle

[Frankie 8,114]

http://www.therangersstandard.co.uk/index.php/articles/current-affairs/321-rangers-hearts-and-the-case-of-wee-thistle

 

Hearts administration has raised many questions regarding the comparability of treatment against that of Rangers. This is fundamentally problematic given the unique nature of any insolvency and the difficulties most fans and pundits have in setting aside club loyalties to engage in any form of rational debate. Let us imagine then a hypothetical scenario…

 

- Wee Thistle are pursued by HMRC for an amount equivalent to double their annual turnover. This is a mistake on HMRC’s part as they ultimately lose the case. None the less it creates a fundamental uncertainty on a scale which would cripple any business.

- The owner of Wee Thistle is extremely worried as he can’t pay the potential liability. The wider economy is in turmoil, the other companies in his group are struggling and HMRC are also taking action against some of these related entities.

- Wee Thistle and the rest of the companies in the owner’s group owe their bank a lot of money. They begin to exert extreme pressure.

- These factors all combine to create an unsustainable situation and the owner sells Wee Thistle.

- The new owner has no money. He buys Wee Thistle by taking a loan against future season ticket money. This is in effect using the company’s assets which he does not yet own to buy the company. This transaction will subsequently be subject to a police investigation to determine whether a fraudulent act has occurred.

- This transaction yields the former owner a whole one pound.

- The bank, effectively owned by the tax payer after a huge Govt. bail-out, receive their debt in full (Wee Thistle having already successfully cut this in half over the last couple of years to the detriment of the quality of player they can field).

- The new owner, having no money, does what every businessman in this situation should to help their cash flow and stops paying all unnecessary expenses. A harsh reality of business is the first such payments that should cease when any company has cash shortages are anything to HMRC.

- This non-payment is though only ever a short-term measure and administrators are inevitably called in.

 

How do we imagine the football authorities would react to the plight of Wee Thistle FC?

 

Is it correct that the bank, which was after all bailed out by taxpayers, have received their money in full yet their actions have directly contributed to HMRC and many other creditors losing out?

 

In the event of the sale of the business and assets followed by the liquidation of Wee Thistle Ltd would Wee Thistle’s supporters willingly accept the club dropping from the top tier to the bottom?

 

How culpable are HMRC in this scenario? Are their initial actions not ultimately the reason for the non-payment of taxes by the new owner? He would never have been in the position to withhold those taxes had they not wrongly pursued their initial case.

 

Do the fans of Wee Thistle deserve to be subjected to a campaign of vilification and a concerted effort to see them lose their team by fellow fans of every other club in the land?

 

Of course we all know the reaction to the above events would have been different if we were really talking about Wee Thistle not Rangers. The treatment of Hearts, and in particular the puzzling revelation they have already received £690,000 of their total £790,000 “prize” money for finishing bottom of the league, illustrates this point perfectly. For all that, I still genuinely don’t want Hearts to cease to exist. I’m not so bitter I would wish to deny any football supporter the opportunity to go see their team and share in the collective joys and despair this brings with their family and friends. If £100,000 really will make a difference in ensuring they do not disappear entirely then, on reflection, who amongst us would realistically begrudge it being advanced?

 

It is not that simple, though, because that is not the proposition in hand. The SPFL can and will dress it up but this £100,000 is to stave off immediate liquidation and in all likelihood prevent the club starting over in the bottom division next season. How can that be remotely justified when set against what happened to Rangers?

 

I realise I will be in the minority regarding sympathy for other clubs or accepting there are any circumstances under which assistance can be provided by the authorities. Let me be clear though, assistance in the form of this additional £100,000 from the football authorities must be accompanied by an unambiguous statement openly and publicly acknowledging the inherent inequity in their preferential efforts to aid Hearts against their punishment of Rangers.

 

Unless they do so there remains no option but to conclude… witch hunt then, witch hunt now, witch hunt forever.

 

 

Douglas Cameron is an accountant working specifically on the sale/acquisition of companies.

[amms 0]

Ah, but, we cheated, for years too. Hearts are just unlucky.

 

I actually don't mind the SPFL assisting Hearts, I can see no benefit in Hearts going into liquidation and being demoted for non-footballing reasons. Two wrongs don't make a right. The hypocrisy is breathtaking of course and the double standards are what we expect. I'm so disillusioned with Scottish football that I'm not sure I really care what happens to any other side except Rangers now though. If they go bust so be it, if they don't I'm fine with that too.

[andy steel 0]

Still not sure this bit:

 

"A harsh reality of business is the first such payments that should cease when any company has cash shortages are anything to HMRC"

 

does us many favours. Perilously close to justifying Whyte!

[the gunslinger 3,366]

Good luck to hearts

[der Berliner 3,217]

Great article.

 

Just a couple of points. Had we had a similar league body as it is now in 2012, we would not have ended up in SFL 3. That is, one body covering all four professional divisions. Essentially, taking Hearts as an example, we would have faced a points penalty, a fine and that would have been that. No loss of SPL membership, no applification for and to the second Scottish league body and, consequently, starting like a newcomer. The restruction of the leagues took care that what befell us could not befell other clubs, unless they are indeed liquidated. That the SPL board and later on the clubs declined to live up to their responsibilities and handed the "vote" to their support, was scandalous, uncalled for, unnecessary and premature. As the EBT ruling showed in the end. Does anyone think that if Barca or Bayern face up to the same scenario, and the supporters of their rivals get the vote, either of these teams would stay in their current divisions? Anyone that I have told about our fall shook their heads in disbelief at the actions of the SFA and SPL. And they actually asked why UEFA let this happen too, why we did not apeal et al. Good questions indeed. And you wonder how the SFA and SPFL justify their actions here and back then against us. You'd hope that at least some of these people, be that SFA, SPFL, or from the boards of the clubs would whisper a word about their actions back then and - shock-horror - apologize.

 

Regarding Hearts. At this moment and time, I hope that they get all the punishment they deserve. Utterly disgusting behaviour from nigh all of them during our fall and hence their current support should receive some of that medicine too. Might brainwash a few.

Still, Hearts are more than their current leadership, their current crop of fans. They have a rich tradition and belong to the Scottish game. So I hope they survive in one form or another.

[craig 5,195]

Still not sure this bit:

 

"A harsh reality of business is the first such payments that should cease when any company has cash shortages are anything to HMRC"

 

does us many favours. Perilously close to justifying Whyte!

 

It isnt a justification of Whyte but more a statement of reality. Douglas Cameron is right, when faced with cash shortages, more often than not the first creditor to NOT be paid is HMRC. I have witnessed it myself when in public practice in Scotland.

[Scott7 5,106]

Still not a good idea, though, is it?

 

I seem to recall Duff & Phelps in their first report saying the Company had been using the PAYE deductions as working capital "not a sound business strategy".

 

It's usually a sign that a business is on its last legs is it not? Buying time. Putting off the evil day. Not many recoveries from that position I don't think.

[craig 5,195]

Still not a good idea, though, is it?

 

I seem to recall Duff & Phelps in their first report saying the Company had been using the PAYE deductions as working capital "not a sound business strategy".

 

It's usually a sign that a business is on its last legs is it not? Buying time. Putting off the evil day. Not many recoveries from that position I don't think.

 

Nobody said it was a good idea, not even Douglas Cameron in his original article suggested it was a good idea.

 

If companies stop paying HMRC because they dont have the cashflow from the business model then it is a sign of struggles more often than not. Doesnt necessarily mean on its last legs as it could be a short term cashflow issue - but I know if I owned my own business I wouldnt want to not be paying what was due to HMRC - the problem is that HMRC only really check on balances annually and a short-term cashflow problem can quickly become a longer-term easy solution to those problems.... until you have to file your P's (payroll tax forms - P14's, P11's, P60's etc) and your CT returns..... because then the Revenue will start chasing what is theirs.

 

Not a sound business practice, not at all.

[Scott7 5,106]

" The new owner, having no money, does what every businessman in this situation should to help their cash flow and stops paying all unnecessary expenses. A harsh reality of business is the first such payments that should cease when any company has cash shortages are anything to HMRC."

 

"Should"?

[TheTinMan99 0]

If it's a choice between paying HMRC, and your regular suppliers, then it's a no-brainer. A business can still function, and possibly get itself out the mire without settling on time with HMRC. It's difficult to keep trading if you get your electric cut off, or can't pay police costs, wages, etc. You have to delay the costs of things that don't actually affect the running of the business.

 

It only buys you so much time, but it can often be enough to sort out short-term cash flow problems.