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FOREWORD: The author would like to thank the author of The Football Tax Havens Blog for the provision of some of the information used in this article.

 

There is one thing I can say with some certainty regarding the HMRC enquiry into Rangers Football Club and that is that it has left a legacy of confusion, contradiction, misdirection ( some of which may either be deliberate or as a consequence of gross negligence) and of course, last but not least, accusation. The fact that some of the key players involved in the whole process now face criminal prosecution should confirm, for even the casual onlooker, that all has not been above board.

Allow me to illustrate courtesy of these two links, which contain contradictory information, but nonetheless, were written in good faith by the respective authors.

 

http://sport.stv.tv/blog/203241-rang...ions-answered/

 

http://www.accountancyage.com/aa/new...kets-by-gbp73m

 

The former link written by Mike Farrell for STV attributes HMRC as the largest single creditor at the time of rejection of the CVA whilst the second link written by Rachael Singh for AccountancyAge suggests at the time HMRC vetoed the proposed the CVA they were in fact the second largest single creditor.

 

What we do know is that at some point Duff & Phelps added the outstanding potential estimated liability regarding EBT’s to the overall bill due to HMRC. A potential bill which never came to fruition due to the rulings of various Tax Tribunals in favour of Rangers.

 

What is both concerning and alarming is that such “confusion” appears to extend to high level executives within HMRC itself as this Public Accounts Committee Q & A demonstrates.

 

http://data.parliament.uk/writtenevi...ral/11443.html

 

In question 54/55, tendered by Anne McGuire MP, Mr Jim Harra – Director General Business Tax HMRC, moves to correct Ms McGuire regarding her apparent “misapprehension” by responding as follows:

 

“It has been in the media. This dispute on employee benefit trusts was not the reason why Rangers went into liquidation. It was for non-payment of their standard pay-as-you-earn and VAT obligations.”

 

No Mr Harra that is not entirely accurate either. That is the reason that Rangers went into administration. The reason Rangers went into liquidation is because, as either the primary or secondary creditor, HMRC the organisation you represent, vetoed the proposal for a CVA.

 

It is really asking too much of HMRC officials, particularly high ranking ones to provide accurate information in response to questions from Members of Parliament who sit on a Public Accounts Committee?

 

Furthermore, just to add some added spice to this bubbling pot of confusion and accusation, the reasons for such refusal are themselves subject to considerable speculation.

 

http://www.eveningtimes.co.uk/news/q...0639n.24716091

 

http://www.heraldscotland.com/news/h...probe.24725771

 

In the questions aforementioned Ms McGuire also raises the subject of pre-litigation settlement.

 

It is perhaps worth highlighting at this point that Rangers were not the first football club to fall foul of HMRC. In 2005 during Ray Parlour’s divorce proceedings it was revealed that during season 2000/01 Parlour paid tax at a rate of only 22% courtesy of an off shore benefit trust operated by Arsenal. HMRC reacted to this information billing Arsenal for £12 million which they settled in full. While the differing circumstances of each case make a side by side comparison impractical, it does raise the question of why HMRC waited 5 years to pursue Rangers in respect of an EBT payment scheme previously declared in annual accounts)

 

Returning to the subject of settlement Mr Harra responds:

 

“In terms of when we decide to litigate, we have a published litigation and settlements strategy that states we will settle only for what we believe we are due under the law. If we believe that we have a greater than evens chance of getting more by litigating than what we can get by settling, generally speaking that is what we will do: we will litigate. We are proud of the success record that we have in litigation. In avoidance cases, we win about 80% of all the cases that we litigate, but that does mean we are not successful in 20% of them. We are disappointed by the upper-tier tribunal decision in the Rangers case. It is still something that can be the subject of appeal, so I cannot go into too much detail about the litigation itself, but, as I said, we have a very good track record and we may not have reached the end of the line on this one.”

 

Of course such litigation is at public taxpayer’s expense. Perhaps Ms McGuire would care to ask HMRC at the next Q & A why a government agency whose remit is to bring people to account for failing to keep meticulous financial records, cannot themselves keep accurate records with regard to their own operating costs.

 

http://www.heraldscotland.com/news/h...-case.26228807

 

So in summary we have HMRC continuing to pursue Rangers FC (Oldco) at public expense, having refused an offer of an earlier settlement, in the belief they will be “getting more by litigating than we can by settling” despite the fact HMRC themselves forced the company they are pursuing into liquidation. Perhaps Ms McGuire would care to ask what financial settlement HMRC hope to achieve from a liquidated company.

 

The more you add up the sums the less it makes logical or financial sense, in fact it only serves to add credibility to the accusation that HMRC’s rejection of a CVA was to ensure an investigation into Rangers directors and owners.

 

If the circumstances aforesaid have caused you to utter the words “scandalous” then you may want to re-think your choice of words.

 

In the Rangers Tax Case HMRC considered that the appointment of EBT funds on to a sub-fund or sub-trust for the benefit of a particular employee and/or their family gave rise to a PAYE charge.

 

HMRC were also of the opinion that loans provided from these sub-funds were not loans, but were akin to a bonus available without any chance of repayment and, therefore, again subject to PAYE.

 

What lifts this above even “scandalous” is such arguments have been challenged unsuccessfully before in the cases of Dextra Accessories ([2005] STC 1111) and Sempra Metals ([2007] STC 1559), yet HMRC continue to put forward this argument, at the tax payers expense of course

 

Sometimes “scandalous” is just not enough.

Edited by D'Artagnan
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It was only because of the alleged EBT tax bill that HMRC got to veto the CVA. It meant they became the biggest creditor.

Yet this clown JimHarra doesnt seem to understand this?

 

Im not convinced of that Rab - as I point out there are two sources of info on this which appear to contradict each other as to whether HMRC were primary or secondary creditor

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Im not convinced of that Rab - as I point out there are two sources of info on this which appear to contradict each other as to whether HMRC were primary or secondary creditor

 

Surely the EBT tax bill shouldnt have been included in allowing HMRC to be the main creditor because it was being contested?

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Surely the EBT tax bill shouldnt have been included in allowing HMRC to be the main creditor because it was being contested?

 

This link here Rab suggests that was not the case

 

http://www.accountancyage.com/aa/new...kets-by-gbp73m

 

The STV one contradicts it.

 

Thats why I spoke of the confusion - some of which is clearly genuine, while other parts are clear misdirection

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