Rangers’ Administration – Round Up Part 5 – Emoluments, Loans and Gratuitous Alienations

This is, I promise, a quick post.

The issue with Rangers’ EBT’s is whether or not these are actually payment for services rendered, in which case they are taxable income, or loans made on a discretionary basis by the Trust.

Various people have queried if D&P can get back the money paid by RFC to employees under the EBT’s. After all, runs the argument, surely these are loans, and if so are recoverable?

The problem is the process by which the payments are made. In this instance RFC, the employer, makes payments to the Trust, which is a separate legal entity. It is up to the Trust to make payments by way of loans or non-contractual bonuses on a discretionary basis to the recipient.

As the Rangers Final Accounts to June 2010 said:- “The Murray Group Management Ltd Remuneration Trust (MGMLRT) was established to provide incentives to certain employees and other service providers. Payments to the Trust are charged to the Group Profit and Loss Account in the year incurred.”

Therefore RFC paid MGMLRT and that entity then paid the players and other officials, such as Campbell Ogilvie, as discussed in the Scotland on Sunday today.

If, as Mr Ogilvie says, he received a loan from MGMLRT then this would be repayable to the Trust and not to RFC.

The fact that the payment by RFC is recorded in its books as a loss is also an interesting factor. I do not know if there is a contractual agreement between RFC and MGMLRT to pay specific sums into the Trust. However, gifts would not normally be tax-deductible, whilst bonuses paid by an employer, even if non-contractual would.

In any event, the law in Scotland, if that is where the Trust is set up, means that, if a continuous period of five years passes without the debtor acknowledging the debt formally, for example by making a repayment, and without the creditor taking action, such as raising a court action, then the debt is extinguished.

One assumes that the Trust in this case will have been mindful of its responsibilities and sought recovery of the loans, or at the very least taken action to prevent their claims becoming time-barred.

It would be a dreadful oversight, though perhaps understandable when dealing with so many payments, if the Trustees lost track of what had been paid, when and to whom.

For example, looking at Mr Ogilvie, did he repay the loan he received on leaving Rangers? If not, the Trust cannot pursue him for it now.

If RFC has made these payments to the Trust effectively to be untaxed salary and bonuses, might this be treated by a liquidator as a gratuitous alienation by RFC? In that case, the liquidator could look to recover from the Trust (if it has any money left) payments made to it by RFC within the previous 5 years.

The FTT decision will make it much clearer if such options might be available to a liquidator of RFC.

More later re Mr Ogilvie’s interview.

 

Posted by Paul McConville

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9 Comments

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9 responses to “Rangers’ Administration – Round Up Part 5 – Emoluments, Loans and Gratuitous Alienations

  1. “In any event, the law in Scotland, if that is where the Trust is set up,..”

    Might it have been established elsewhere? What if it was England – would that make a vast difference to anything? Presumably it would be very different if it was established in one of the usual off shore places?

  2. Liam Johnston

    if there has been no agreed loan repayment how can MIH claim these are loans?Genuine question as I am baffled as to the length of time it’s taking to deliberate. Surely if there is no evidence of a loan agreement and the contract between the employees and the employer has an agreed wage of which income tax and NI is due which doesn’t show in the co. accounts then is it no clear cut tax avoidance? Pardon my ignorance if the above is nonsense. Great blog by the way.

  3. gopaul

    Question for sports freaks…

    Did any rangers players play for teams who have qualified for Euro12… and if there exists double contracts for these players – could their international teams – loose thier places…..

    We know scotland did not qualify… but did any other international team qualify with a rangers player who could have been part of the EBT ?

    I dont think ogalvie would survive if this was a case?

    • Like Jelavic, for instance?

      Started for Croatia in three out of 10 Group F qualifiers and came on as a sub in another four.

      • gopaul

        ooooo – ogalive is toast!

        So does Israel therefore have claim to Croatia place in 2012 ? in that Croatis may have fielded an ineligable player – if that player was playing in the SPL in a manner whereby they not legally registered with the SPL ?

        now a lot more at stake on this – and Israel FA only need to ask the question of SFA?

  4. Should “RGC” in the first line of the third-last para be “RFC”?

  5. AnonLawyer

    Paul – sorry to be a pedant, but I don’t think you’re quite right when you say “In any event, the law in Scotland, if that is where the Trust is set up, means that, if a continuous period of five years passes without the debtor acknowledging the debt formally, for example by making a repayment, and without the creditor taking action, such as raising a court action, then the debt is extinguished.”
    The 5 year period wouldn’t run from the date the loan is made, but the date upon which it becomes payable. There is likely to be no contractual terms between the players and the trust. In that situation, the loan becomes payable on demand. If no demand has been made, the 5 year prescriptive period hasn’t started to run.

    Otherwise, another fantastic entry in an excellent blog.

  6. Curlybhoy

    If the loan isn’t paid back doesn’t it become a Benefit in Kind and therefore the player would be liable for the tax?

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