A Tale of Two Companies – Rangers Football Club PLC (in administration) and Donaghy Ltd

It was the best of time; it was the worst of times…

———-

Rangers Football Club PLC (in administration) employs 177 staff, according to the BBC.

The company  owes HMRC vast sums, accrued through its operation of the EBT schemes in an effort to reduce tax. Whether, in the famous words of the former First Minister, Henry McLeish, it was a “muddle, not a fiddle” is neither here nor there. Rangers will be found liable for many millions of pounds in unpaid tax, to which will be added interest and penalties.

The Court of Session was told on Tuesday that Rangers’ unpaid tax bill has gone up by over £9 million since Craig Whyte took over. This is not because of some complicated scheme being unravelled, but simply because he has refused to pay over the HMRC the funds he had collected and deducted for them.

Rangers have a £10 million a year shortfall in its income, and Mr Whyte dealt with this by increasing wages significantly in the summer, and turning down a reported £9 million bid for a man later sold for a rumoured £5.5 million.

Rangers do not make profits (thus avoiding legitimately the need to pay Corporation Tax).

In the last two days we have seen various politicians asked about Rangers, and giving answers which seem to miss totally the reality of the situation.

This is not a shipyard facing closure because an order for construction of a cruise ship or naval vessel has been cancelled at the last minute, due to the order being undercut by a foreign yard, for example, or a business owned abroad suddenly having its Scottish operation closed because pen-pushers in the USA, for example, need to cut the budgets.

This is a company placed in financial peril by the open-eyed actions of its successive owners, and by deliberate attempts to get round the tax laws, to the company’s competitive advantage.

The Scottish Sports Minister, Shona Robison, said on Wednesday:-

“In a telephone conversation this morning with the administrator, I explained that we want to see an outcome in the best interests of Rangers staff, supporters and the game of football in Scotland as a whole, whilst enabling the club to meet its obligations.

A key concern for us is the future of those employed by the club and the potential economic impact of administration.

“The Government stands ready to offer assistance to anyone affected by implications for jobs and we will stay in contact with the administrator throughout the process to ensure we are informed of any developments.”

Margaret Curran, the Shadow Scottish Secretary, has also written to the Treasury, urging it to act “in a reasonable way” with the club.

She wrote: “The ongoing discussions between HMRC and Rangers are key to reaching a sustainable outcome for the club.

Deputy First Minister Nicola Sturgeon said she hoped a solution could be found to allow the club to continue trading and meet its employment obligations.

She added: “Now that an administrator has been appointed, I very much hope that a way forward can be found that allows Rangers to meet its obligations, continue in business, and save jobs.”

Meanwhile, First Minister Alex Salmond admitted he was “very concerned” about the future of Rangers.

I posted a transcript of what Mr Salmond told the BBC on Wednesday here.

In particular, he said:-

“I contacted both Rangers and HMRC, whose record in court is not particularly good at the present moment and I said once this Tribunal which is adjudicating on what genuinely owed – once that Inland Revenue Tribunal sets a sum – can’t that not be agreed as the sum that has to be paid and a time scale agreed to allow the club to pay it without going out of business.

Mr Salmond also said in a separate interview “Obviously HMRC have got to pursue in the public interest, taxation. Equally, they’ve got to have cognisance of the fact that we’re talking about a huge institution, part of the fabric of the Scottish nation as well as Scottish football, and everybody realises that.

“The most diehard Celtic supporter understands that Celtic can’t prosper unless Rangers are there. The rest of the clubs understand that as well. Therefore you have to have cognisance of these things when you’re pursuing public policy.

———-

Earlier this week another business, also based in Govan, went into liquidation with the immediate loss of 175 jobs, and with the final 10 employees kept on to oversee the last rites of the company.

No politicians demanded that the creditors behaved “reasonably” and allowed the company to pay off its debt over a “reasonable” time.

This was not a business which had lost many millions of pounds over recent years in a desperate bid to be “simply the best”. It had not entered into complex, but ham-fisted, tax reduction schemes in an effort to deprive HMRC of its rightful dues.

This was not a business where the owner had publicly stated that income was £10 million less than expenditure, nor was it a business where the owner, at the same time as deciding that administration was almost inevitable turned down a huge offer for a business asset, and significantly increased the earnings of some of his staff.

The owners did not allow outstanding tax bills to increase by £1 million per month each and every month for the last nine, through a deliberate policy of non-payment.

It was even a profitable business, but as we know in the recent economic climate, profit without necessary cash flow is not always enough.

As the liquidator, Blair Nimmo, said “Regrettably, we had no option but to close the business and to make most of the employees redundant. We will now be working with the relevant government authorities to ensure staff can claim outstanding sums due to them.”

Donaghy Ltd is in liquidation, the owners have lost what they spent nearly 13 years building up, and 175 families have had their breadwinner suddenly and brutally put out of work.

———-

Have any of these politicians realised what they are talking about? None of them has said a word about Donaghy and the job losses there, as far as I can see.

Instead politicians of all hues are clearly looking at what suits them best in the eyes of the electorate (which is not surprising of course).

If Rangers become Rangers Football Club PLC (in liquidation) and all the jobs there are lost, that will be no great hardship for the players, most of whom are paid in a month more than the average worker gets in a year. Many “ordinary” workers will lose their jobs too, and there will be knock on effects for part time stewards etc.

However, Donaghy would have had sub-contractors depending on money coming through from that company.

This is the reality of the disaster wrought at Rangers by both Sir David Murray’s ownership and that of Craig Whyte.

Politicians are looking to justify massive non-payment of tax, which would be well used if actually in the public coffers.

Is the true answer that the politicians are, as they often do, more concerned about the “bread and circuses”? Why otherwise should they be supporting a loss-making football industry?

Do they fear what reaction there would be if the public was not distracted by football, and able to focus on the political failings, on all sides, which have led both Scotland and the UK to where it is now?

It would have been good to see a politician follow the example of Sydney Carton, at the end of Dickens’ masterpiece, and tell the truth about the situation, even at risk to their career, with the words of Carton on his lips:-

“It is a far, far better thing that I do, than I have ever done.”

 NB Edited as referred to in comments

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36 Comments

Filed under Administration, Craig Whyte's Companies, Football, Insolvency, Politics

36 responses to “A Tale of Two Companies – Rangers Football Club PLC (in administration) and Donaghy Ltd

  1. steven doyle

    Politicians shouldn’t go near football .Also a random thought here ,am I right in thinking CW registered a couple of rangers names ?I wonder if he’s hiding the assets in one of these

  2. Well researched, as always.

    The beauty of limited business – or more so, the harsh reality.

    It is a reality that- not ‘probably’ but ‘definitely’ should befall Rangers should a substantial tax liability be found. I think I have been grossly misunderstood in previous debates on this matter( probably my own fault for being lazy with explanations). It is not that such a fate should NOT befall Glasgow Rangers; it is just that I do not believe for a minute that it will be allowed to due to recent statements from Government.

    ( Not saying it is right – just that it is the harsh reality)

    Crazy place our country….

  3. Fisiani

    Cui bono……who benefits.
    This is an old adage that is moot.
    The SNP politicians fight in the Blue corner hoping for 200,000+ Blue votes in the referendum. Cui bono……the SNP
    They do not fight for the 175 votes of the Govan workers
    Cui bono………..175 workers and their families
    When liquidation occurs and it will then this will be just the tip of the iceberg.
    They will lie ” Celtic need Rangers”
    They will be rebuffed by Celtic
    They will lie again and again .
    The problem lies in 4 simple words
    “We are the people”
    Therein lies the sense of entitlement and superiority. “Rangers are too big to fail” trips from their lips. Words like inconceivable and unthinkable will be commonplace.
    Watch out for the classic opening “Obviously” this is said when the next words are anything but obvious. This is simply a linguistic attempt to crush dissent. eg. Obviously the health of the SPl needs rangers

  4. Garry88

    garryjbmacinnes
    February 17, 2012 at 12:45 am ….. To you sir i am a mere simple man certainly not an educated type by any means , i follow most of your stuff including this site too , though i feel i am able to quantify what a Harsh Reality is , no work @ Xmas there’s 1 & quite a biggy if you ask me too , i could go on public services , education , All being denied to the public purse from Alleged TAX Evasion …… Now in this situation entirely created by meglomaniacs & charlatans many honest decent people will lose their jobs maybe even mortgaged homes & family lifes who knows that is a Harsh Reality …. I do not for 1 second have any doubts that the both statements from Cameron & Eck are nothing more than ” political posturing ” asked a question & all that , they cant very well say , throw em to the lions so like i said posturing ‘ Rangers are in all intensive purposes ” Reeping What They Have Sown ” & as the Mustard wearing corduroy blazer & brogue type states ( GS – He knows who he is …. ) ” It Is Indeed A Bitter Harvest ” that has been gained through said reeping , they are only a football team & in the grand scale of things , the show must & will go on although im afraid it will NOT be with A Rangers as you or i know it , no doubt they will be here in some capacity or form BUT they are something entirely different ( hopefully for many reasons ) No-one has any money in real life , never mind to bail out a corrupted fiscally inept company/organisation who has no real desire to be @ the party for the fun BUT must instead exist to be ” Simply The Best ” i am a level headed fair minded celtic fan with no Axe to grind with any team creed / race i follow my club because it has very similair Values & Wants to be @ all the party’s BUT does NOT mind playing by the rules & embracing all who adopt the same beliefs /principles .

    • I would never disagree with any of that on a personal level to be honest.

    • I fact I have some very strong feelings regarding the way this country currently, and has previously, felt with such situations.

      Perhaps one day I shall detail them.

      However, until then- all I can do is sympathise as someone of a similar view.

      Nothing can be condoned, but as per usual- politics is a nasty game. Every situation is exploited for personal gain. Indeed- the me,myself and I attitude is the very thing ruining this country from the core out. Sadly- as this appears to be the only attitude to guarentee success these days- it is spreading like wildfire.

  5. Insomniac

    Blair Nimmo has been involved in almost all of Scottish Football’s insolvency events, I think. Strange that the man in Scotland most qualified to deal with such events has been by-passed in favour of the MCR/Duff & Phelps mob.
    Great stuff, as usual, Paul.

  6. ifa007

    Major Retailers Shut 14 Shops Every Day

    http://news.sky.com/home/business/article/16171546

    Messrs Cameron & Salmond….Demonstrate some integrity by concentrating & putting your resources into matters such as this….that way your morals would not be so questionable.

  7. Well said, PMcC. A hundred thousand times well said.

  8. Garry88

    I did say i was a simple man , Sorry PMcC i got carried away & forgot to say Fantastic stuff as usual …

  9. ifa007

    I am suffering from insomnia tonight…after reading this I will never sleep…sorry for bringing down the tone of the blog…BUT ..you just couldn’t make this up!!

    http://en.wikipedia.org/wiki/Paul_Baxendale-Walker

    Baxendale-Walker was struck off the roll of solicitors by the Solicitors’ Disciplinary Tribunal on 11 January 2007.[7] He subsequently claimed that the Law Society and others had conspired to put him out of business. On 18 April 2011, his claim was struck out by the High Court on the basis that it had no real prospect of success.[8] Baxendale-Walker is the author of the EBT (Employee Benefits Trust) tax strategy implemented by Glasgow Rangers FC, which is currently (April 2011) being challenged by HMRC in the first tier tax tribunal.

    CRAIG WHYTE ADVISOR IS A PORN STAR

    http://www.thescottishsun.co.uk/scot…porn-star.html

    What I would like to know is where did he & Craig Whyte first meet!?

    • There was some talk on my own sight yesterday about this as I has mentioned a long time ago that e was a porn star. I can happily send you links to his website of you wish haha although I have never seen his videos his company is based in the US and was started in 2008.

      He also starred in a TV programme called ” no tax please- we’re rich” – one of the many things that you just couldn’t make up regarding this whole situation- but a funny one at that.

      • ifa007

        Gary.Thanks..http://news.bbc.co.uk/1/hi/business/4763984.stm
        BBC The Money Programme Thursday 2nd March 2006
        Paul (Michael) Baxendale-Walker was mentioned there.

        Here is a little bit of Paul Michael Baxendale-Walker’s “success”

        Companies of Mr Paul Michael Baxendale Walker (Craig Whyte’s “Tax Adviser” & Part Time Porn Star)

        A. ADMIN LIMITED Active
        BAXENDALE WALKER LLP Active
        BB MEDIA LTD Active
        BLUEBIRD PRODUCTIONS LIMITED Active
        BRONZEAGE LIMITED Active
        BRONZEMEDIA LIMITED Active
        BUCKINGHAM ADMINISTRATORS LIMITED Active
        CITY LIGHTS DATING SERVICES LIMITED Dissolved
        FULLBIN MANAGEMENT LIMITED Dissolved
        HOPPR ENTERTAINMENT LTD. Active
        LINCOLN PENSIONS ADMINISTRATION LIMITED Active
        MPRO BODYWORKS LIMITED Dissolved
        MPRO DANCEWORKS LIMITED Dissolved
        MPRO FILMWORKS LIMITED Dissolved
        MPRO HARMONIES LIMITED Dissolved
        MPRO INTERACTIVE LIMITED Dissolved
        MPRO LIMITED Active
        MPRO MODEL MASTERS LIMITED Dissolved
        MPRO PUBLISHING LIMITED Dissolved
        MPRO SESSION MASTERS LIMITED Dissolved
        MPRO STUDIOLAB LIMITED Dissolved
        MPRO VOICEWORKS LIMITED Dissolved
        RETRO LIFE LIMITED Dissolved
        SARGESPACE LIMITED Active
        SGBH FINANCE LIMITED Active
        SOCIAL RESEARCH SERVICES LIMITED Dissolved
        ST GEORGE’S BANK HOLDINGS LIMITED Active
        TLG BRITAIN LIMITED Dissolved
        VICTORIA TRUSTEES LIMITED Dissolved

  10. Sir Reginald Loudpants

    a very unfortunate thought…don’t the “authorita” have to think about the public order consequences of the buns going out of business? lets face it, the average (well, rangers fans are very average – extra average perhaps. at best.) go mental. well, mentaller. (did i just make up a new word?)

    if you see what i mean. if we’ve got [s]50,000[/s] [s]40,000[/s] [s]30,000[/s] 16,000 “loyal” supporters with nothing better to do on a saturday, might this not put other more financially competent clubs supporters in the same city at risk going about their saturday ritual?

  11. oisin71

    Excellent article Paul.

    Shameful vote posturing by the double-standard politicians. Though not surprising, as they all know a thing or two about creaming off from the public purse. All leaches of society, so they will happily turn a blind eye to what has actually occured at RFC if it means a chance of re-election.

  12. Andy

    Yes, a good piece highlighting political hypocrisy. However, the true problem lies with the level of financial chicanery blossoming in our country. When many of our finest legal and financial minds are dedicated to finding “loopholes” in the law, what does that say about us? To then have to listen to our political leaders effectively absolve the perpretators ! Strange days, indeed.

  13. Brian Swanson

    Aside from Donaghy not being in Nicola Sturgeon’s constituency and in fact being in Johan Lamont’s constituency. Perhaps you wish to amend your article to reflect this

    • Please see my reply, either above or below.

      I will do so when able.

      • Andyfisher1967

        Ms Sturgeon felt compelled to make comment on RFC but not Donaghy is the issue in hand; boundaries are irrelevant! Govern the Country and show the same level of concern for the 16,000 people that hit the dole queue last month, and the 175 people at Donaghy, is the underlying message here surely?

  14. Carrie

    You should check your research – Why would Nicola Sturgeon say anything, the company isn’t in her constituency – it’s in Johann Lamont’s!

  15. Ken MacColl

    It seems that Donaghy is not in fact in Nicola Sturgeon’s constitruency but in the neighbouring patch of Johann Lamont.

    Doh!!!

  16. Andyfisher1967

    Paul thanks for continuing to thoroughly relay what many of us think… Hopefully like many others, my email to Mr Salmond and the SNP party yesterday, was based 100% around the moral obligation of politicians to be impartial and have a duty of care to all citizens; however more specifically regarding the liquidation of Donaghy and the lack of support (by this I mean none) shown by Mr Salmond and Ms Sturgeon in public.

    My belief is that this whole situation is not over by a long shot. Will liquidation happen? Maybe not; should justice prevail? Yes it should!

    And to directly answer a previous question; justice should be administered in whatever form that it can be if it is proven that either fraudulent or criminal activities have taken place (including Tax aviodance). Justice in a sporting sense is the stripping of honours where required. The punishment must fit the crime and a message must be sent out that “cheating your way to success” will not be tolerated – regardless of the size or stature of the institution.

    The fact that the police are now investigating the “ongoing situation at Rangers Football Club” certainly comes as no surprise to many; as serious questions have been asked is it one rule for RFC and another for me??? If HMRC who stated in court that RFC were insolvent and the Directors of the Company knowingly continued to operate that business (while not paying PAYE or VAT bills) then that is a crime plain and simple.

    Keep up the great work.

  17. A at B

    “The company owes HMRC vast sums, accrued through its operation of the EBT schemes in an effort to reduce tax. ” Paul, could you point me to the published ruling of the HMRC FTT case? I was under the impression that this has not been published yet and therefore the above quote would be pure speculation.

    • TheBlackKnight

      I believe the assessment was issued, therefore a bill. The assessment was appealed and we await the determination of (quantum) the amount.

      Slightly picky, but I’m sure Paul could amend (inserting “could owe”)

      • A at B,
        Rangers owe the money. They appealed the bill. It does not vanish, but enforcement is on hold till the Tribunal decides. Therefore, as matters stand, Rangers owe vast sums which the Tribunal might reduce.

        TBK,
        Thanks for the comment. I won’t alter this bit. :-)

  18. TheBlackKnight

    Paul, the ‘moral question’, sublimely put!

    Chapeau!

  19. ifa007

    Apologies uf this has already been posted.

    3 June 2011
    Circular to the shareholders of The Rangers Football Club P.L.C.

    http://tinyurl.com/67364so

  20. Donaghy Ltd

    Excellent Article Paul, i am both an employee and family member of Donaghy Ltd. With regards to Nicola Sturgeon, we at Donaghy Limited did everything to accomidate her last year on one of our sites at Holmfauldhead Road in Govan, so she could get a bit of press coverage in relation to the ongoing Govan regenration. In terms of public support we have received nothing, outside influences caused our demise and we are the third groundworks contractor to go into liquidation in the past six weeks with Harte and Drumbow. This has resulted in over 1,000 people losing there jobs.

    • Thanks for your comment.
      You are quite right about the difference in approach between your own situation, and Drumbow and Harte, as opposed to Rangers.
      I know that me wishing you and the rest of the Donaghy employees all the very best in getting something new does not mean much, but if the fuss about the apparent double standards of some politicians means that they can be pro-active to prevent large scale closures like the ones mentioned, some small amount of good might come out of this horrible mess.

  21. Thekwizatshaderach

    “Well, in our society, we have things that you might use your intelligence on, like politics, but people really can’t get involved in them in a very serious way–so what they do is they put their minds into other things, such as sports. You’re trained to be obedient; you don’t have an interesting job; there’s no work around for you that’s creative; in the cultural environment you’re a passive observer of usually pretty tawdry stuff; political and social life are out of your range, they’re in the hands of the rich folk. So what’s left? Well, one thing that’s left is sports–so you put a lot of the intelligence and the thought and the self-confidence into that. And I suppose that’s also one of the basic functions it serves in the society in general: it occupies the population, and keeps them from trying to get involved with things that really matter. In fact, I presume that’s part of the reason why spectator sports are supported to the degree they are by the dominant institutions”

    Noam Chomsky

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  23. GiGi

    An excellent read. All of it…! I am engrossed by every word.
    I’m sure that this’ll make a best selling novel when/if the whole truth comes out. I am amazed at how you find all this stuff out.

    It did occur to me though, what happens with the ‘big tax case’ if Rangers PLC/Group etc…. goes into liquidation prior to May?
    If this happens, does the ‘big tax case’ get cancelled since defendants no longer legally exist and if so, is this why HMRC does not want to push the liquidation, at least until after May?
    If, as rumour has it, HMRC has bigger targets in the EPL, and the Rangers case is ‘just a test case’, I would have thought they’d want to do their damndest to ensure that the case doesn’t fall through.

  24. Pingback: Murdo Fraser MSP and Rangers Administrators – Part 2 | Random Thoughts Re Scots Law by Paul McConville

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