First of all, my Part II update is still in gestation. Thoughts on Mr Craven’s ban and Hearts situation, together with the latest regarding, inter alia, “illicit” chanting will be arriving at a blog near you soon.
However, in light of the adjournment of the First Tier Tribunal (Tax) to three days in January, I wanted to drop a few thoughts, and also to deal with some of the issues which are hot topics on the RangersTaxCase.com blog.
As RTC said back in the mists of time – the FTT(T) had to look into every single transaction involving Rangers and the EBT. Some might have been legitimate and some might not. Parts of some might be kosher, and parts not. The case might involve a hundred, if not hundreds, of transactions and payments.
If Rangers had some knockout punch to establish the whole thing was legal, then the hearing would be long over. It is not. Therefore one assumes that what is being argued about is how much Rangers owe.
The FTT(T) will almost certainly find that Rangers are due to pay tax, and a great deal of it, when this ends, but (and as far as the UEFA licence goes) until the appeal is decided, and indeed any subsequent appeal, this money is not overdue.
The UEFA Licence
Did the SFA grant Rangers a licence to play in Europe this season against their own rules. Put shortly, if Rangers were overdue tax payments to HMRC on 31st March 2011, and had not cleared these by the end of May or June (I can’t check right now, but am sure either one is correct) then they ought not to have been permitted to play in Europe this season.
The wee tax case, referred to below, is the key here. Was it overdue within the meaning of the regulations at the relevant dates?
As we have already seen, neither UEFA nor the SFA are going to give out the sensitive commercial information involved (although much of it of course is publicised in the annual accounts). The possibilities are as follows.
1 Rangers were not overdue with taxes at the relevant dates within the meaning of the rules and therefore fully complied with all licence regulations. Nothing to see here – move along please. The issue is closed
2 Rangers were overdue with their taxes at the relevant dates within the meaning of the rules in which case:-
2A Rangers told the SFA this and the SFA disregarded it. This was either:-
2A1 Because the SFA misunderstood what they were being told, and therefore granted the licence in error, or
2A2 Because the SFA deliberately disregarded it and granted a licence despite its own rules. If so, it makes “Farry-gate” pale into insignificance.
2B Rangers did not tell the SFA this. In which case there are the following possibilities:-
2B1 Rangers deliberately misled the SFA by way of false documents or declarations for the purpose of deceiving them to their financial advantage. If so, this is a police matter, over and above footballing issues.
2B2 Rangers innocently misled the SFA either by making innocent errors in their paperwork to the SFA or by declaring that no tax was overdue under a misapprehension as to the true legal and factual position.
If the answer is found in para 1, then the matter is over.
If in para 2A, then Rangers cannot be faulted but the action which will involve the SFA will be determined by whether this was a mistake or a deliberate act.
If we are in the realms of para 2B2, then, as with a mistaken SFA view, questions will be asked, but these matters are complex, and errors can be made.
If we are in para 2B1 then, as I said, we are looking at fraud allegations involving the relevant officials.
I want to make it clear, I have no knowledge as to the correct answer but will take at face value the official position which is that para 1 applies.
All public indications are that the licence was granted correctly. How can the truth be ascertained to the satisfaction of outside observers? The parties with the most interest would be the teams denied European football by Rangers having a licence, or denied a place in the Champions League pot and instead going into the Europa League.
As members of the SFA and as parties directly affected, they could seek to have the decision making process reviewed internally and confidentially. Alternatively, an application could be made to the court for an order under the Administration of Justice Act for documents to be produced by the SFA on the basis that they are likely to be necessary for a future court action, for example against Rangers.
Alternatively, if a concerned citizen thought that, by analysing the public pronouncements and accounts, there was a prima facie case suggesting that a fraud may have been committed (and I am not making such an accusation) then this could be reported to the police. As we saw in the “Cash for Honours” saga, which ultimately did not lead to any prosecutions, the police acted on allegations coming from parties who were not involved in the alleged wrong doing, but instead were acting as “concerned citizens”. What would happen if a “concerned citizen” pitched up at a Strathclyde Police station asking to make a criminal complaint against Rangers and/or the SFA? What level of “evidence” would be needed for the police to investigate?
I have no doubt that the police, in conjunction with the prosecuting authorities, would act entirely appropriately should such an allegation be made.
The “concerned football fan” is not going to get at this information officially. Commercial confidentiality (and I think the rules of the SPL anyway state that financial information given is confidential) precludes this being published.
Equally the concerned football fan would have no title or interest in pursuing a court action against the SFA or Rangers in this scenario.
Until matters are laid bare, whether in court or elsewhere, this will continue to be a source of speculation.
The Wee Tax Case
Rangers have, reportedly, paid £500,000 of their £2.8 million liability for tax due under the Discounted Options Scheme. They say that the penalties are under appeal.
The sum of £2.3 million has been arrested. If Rangers do not suffer an Insolvency Event by early December then that money will be sent by the bank holding it to HMRC. Otherwise, and depending on the nature of the Insolvency Event, the money might go back into the pot, where Mr Whyte will have first call under his floating charge.
No one from Rangers has publicly explained why they have refused to hand over this money. Rangers will be accruing higher interest charges on the bill than they will be earning interest. The only credible reason is to hold on to it in the hope or expectation that the Insolvency Event will happen.
There has been speculation that HMRC will cut some form of deal with Rangers, either because in insolvency they will get nothing, or otherwise will allow Rangers to pay up a £50 million bill at £5 million a year for 10 years.
Put simply, there is no chance of either happening. Especially in the present climate, HMRC takes a very hard line. If a taxpayer wants time to pay off a bill which is outstanding, then they need to be up to date with all ongoing taxes, and pay off the sums due in a year. The tax man will not give someone 10 years, or anything like that, to pay up an outstanding bill, where the company is still trading.
In addition, HMRC looks at the co-operation from the taxpayer. As shown in the Wee Tax Case section above, there has been no co-operation. Why should HMRC accept any undertaking or promise from Rangers when the liability was formally agreed months ago, and the new owner promised the shareholders he was putting up the money to clear it. Over six months later it has not been paid and there is no proof any of that part of the promised funds has been invested by the new proprietor.
HMRC are likely to pursue matters even to the point of liquidation. If it means that in the Rangers case they got nothing back, it would be an example “pour encourager les autres”. They would be making it clear that other football teams, and indeed other businesses, no matter how prestigious, cannot get away with not paying tax which is due, without serious consequences befalling them.
Some have wondered why HMRC has not sought to liquidate Rangers now, as it could. As matters stand, it will get £2.3 million next month. If it appointed a liquidator now, it might get nothing. HMRC has a bird in the hand. It is not going to give that up to get the two in the bush, but once it has cashed the bird the bank is holding for it, HMRC will be back for the two, or the £50 million, in the bush!
The adjournment of the FTT(T) means that a decision in the case will not come now till March or April. Therefore if Mr Whyte planned, as has been speculated, to call in a receiver when the FTT(T) decided matters, and blame the Murray regime for the fall, he will have to wait longer, and fund the “black hole” of £10 million which he himself described, for much longer. Whilst many observers saw the strategy of talking Rangers over, clearing the debt to the bank, keeping the floating charge, racking up the interest and management charges, and then putting the club into receivership as a classic and shrewd way for this successful venture capitalist to get back his money and a substantial profit over a short term, does this change his plans?
It looks as if a lot more needs to be brought in to keep the wages paid.
Are we now looking at a selloff of Rangers players in the January sales? Will buyers pay full price, knowing that long term instalment deals won’t help?
In addition of course, the sale of a player incurs tax liabilities too. Would that process make HMRC even more anxious to pursue them, especially if there were funds about?
Perhaps today’s news will make no difference. Perhaps Mr Whyte is in the game for the long term. Perhaps he has procured funds to keep the Ibrox team on its way to another league title in May.
Or else the delay scuppers his plans to make a profit and we will see the Rangers fans, who seem to have been very supportive of him so far, change their minds?
How many more creditors are going to take Rangers to court and to threaten arrestments?
Might the delays with the tax case result in Rangers still being afloat when Martin Bain’s case is scheduled to come to proof next July?
Who knows? It will be interesting to see, whatever happens.