A Quick(ish) Update on Rangers in light of the Adjournment of the Tax Appeal





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.




The FTT(T)


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!



Cash Flow


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.



Filed under Bain v Rangers, Football, Rangers, SFA, SPL

15 responses to “A Quick(ish) Update on Rangers in light of the Adjournment of the Tax Appeal

  1. steven doyle

    Do rfc have the cash to get to January

  2. iain mcg

    Today forces his hand. I suspect that is what comes as a result of ceding control of the tax case to SDM as part of the SPA.

    It has just made his exit so much harder. Wonder if he now regrets settling the other day with Capita, if indeed funds have changed hands

  3. TheBlackKnight

    Paul, great balanced post as always.

    Any thoughts (mindful of your possible outcomes above) on MBs comments in the Scotsman in May 2010, the UEFA regulations in regard to Licensor’ requirements, and the SFA’s position?

    Annex IX

    D. Assessment of overdue payables towards employees and social/tax
    1. In respect of the overdue payables towards employees and social/tax
    authorities, the licensor may decide:
    a) to assess himself the information submitted by the licence applicant, in which
    case he must perform the assessment according to paragraph 2 below; or
    b) to have independent auditors carry out the assessment procedures, in which
    case he must review the auditor’s report and, in particular, verify that the
    sample selected by the auditor is satisfactory, and he may carry out any
    additional assessment he believes necessary, i.e. extend the sample and/or
    request additional documentary evidence from the licence applicant.
    2. The licensor must assess the information submitted by the licence applicant, in
    particular the list of employees and other corresponding supporting documents,
    as detailed below. If the assessment is carried out by an auditor the same steps
    may be performed by the auditor:
    a) Obtain the list of employees prepared by management.
    b) Agree the total payable in the list of employees with the ‘Accounts payable to
    employees’ amount in the annual or interim financial statements as at 31
    c) Obtain and inspect a randomly selected sample of employee confirmation
    letters and compare the information to that contained in the list of employees.
    d) If, according to the licensor, there is an amount due as at 31 March that
    refers to payables in respect of contractual and legal obligations towards its
    employees that arose before the previous 31 December, examine that, by 31
    March at the latest:
    i) an agreement has been reached as per Annex VIII(2 b); or
    ii) a dispute has arisen as per Annex VIII(2 c or d).
    e) Examine a selection of bank statements in support of payments.
    f) If applicable: examine documents, including agreements with the relevant
    employee(s) and/or correspondence with the competent body, in support of
    the representations under d(i) and/or d(ii) above.
    3. The licensor must assess all supporting documents in respect of payables to
    social and tax authorities in respect of contractual and legal obligations towards
    the licence applicant’s employees. In particular he must perform the following
    a) Agree the recorded balance of payroll taxes as at 31 December to the payroll
    records of the club.
    b) If there is an amount due as at 31 March that arose before the previous 31
    December, examine that, by 31 March at the latest:
    i) an agreement has been reached as per Annex VIII(2 b); or
    ii) a dispute has arisen as per Annex VIII(2 c or d).
    c) If applicable: examine documents, including agreements with the tax/social
    authorities and/or correspondence with the competent body, in support of b(i)
    and/or b(ii) above.”

  4. iain mcg

    Fair play Paul, just like the levy mcrae case was listed again, just to make sure
    For steven’s point, of course they dont! They have no money, hence you have to meet them on the steps to the courthouse to have any chance of getting paid.
    November salary day will kill them, if ever they live that long.

  5. Darren

    They have no money, hence you have to meet them on the steps to the courthouse to have any chance of getting paid…

    Iain.. brilliant 🙂

    Really enjoy the blog Paul, keep up the good work


  6. Daniel Bain

    A lot of desperate Celtic supporters on here, clinging to the hope of a deduction or worse, that they may win a trophy.
    It’s pathetic beyond belief.

    • Daniel,

      Thanks for your comment. I take it you are not related to Martin Bain?

      I can only speak for myself, but I am really not praying for points deductions and the like, as it will make no difference to Albion Rovers!

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