Saturday Musings on Rangers, EBT’s and Directors – After C4 News

NB – This is a copy (with spelling corrections) of a comment I have made on the RTC thread “Evading Avoidance”. I commend RTC’s piece to anyone who has not read it.

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The two changes in tax and insolvency law which most impinge on Rangers were (1) HMRC losing its preferential creditor status and (b) the addition of the anti-avoidance provisions.

It was felt that the taxman sitting on the shoulder of indebted businesses, and grabbing the pot ahead of unsecured creditors stifled enterprise, and discouraged risk taking. That is arguable, but in “normal” cases HMRC often will not hold enough debt to block a CVA. Here they can, and as published by them in their policies and guidance, will do so.

The anti-avoidance rules, requiring accountants to “register” schemes is a bit like inviting computer hackers to break into your system and rewarding them for doing so, as long as they help you fix the vulnerability.

It was projected that at the very worst the two measures would balance out, or indeed lead to a bigger tax take, as fewer businesses would fail.

Unfortunately for Rangers, as Mr Baxendale Walker alleged last night, RFC did not operate the scheme properly at all. (As an aside, I am sure that the solicitors’ rooms in Scotland are deprived by not having a character like Mr BW sitting in them.)

There are numerous “big questions” which one would like to ask the main players.

The one which strikes me for today regarding the EBT’s is why no provision at all was made for the potential tax bill. I don’t mean a “paper” provision, as I recall Adam having long arguments about many months ago, but a real one.

The first Tax Determination re EBT’s reached Rangers in February 2008! Would a prudent company have salted away say £5 million a year towards a potential bill? By now they would have had £20 million in the pot, and at the very least have been able to make more concrete proposals to settle with HMRC.

If, mirabile dictu, they had won the case 100%, then suddenly there would have been a “war chest” with real money in it.

So, as well as allegedly getting the operation of the EBT wrong, and thus opening up RFC to the tax bills, the “ancien regime” failed to make even the most rudimentary of provision for the case going wrong. I cannot imagine that (a) standing the legal advice the Board would have been receiving and (b) the alleged state of knowledge of Messrs Bain, McClelland etc the old Board would have expected for a minute to have no bills to pay.

Of course, if Sir David Murray had succeeded in his plan to sell early on, then the tax case might have been glossed over as a distant and unthreatening cloud on the horizon (apologies for the mixed metaphor and I do not suggest any underhand “glossing over”).

Finally, I wonder if the administrators might give consideration to actions against the directors or former directors personally where it could be alleged that breaches of duty by the directors has led to Rangers Football Club PLC suffering losses…

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11 Comments

Filed under Administration, Rangers

11 responses to “Saturday Musings on Rangers, EBT’s and Directors – After C4 News

  1. Bigoos O` Penn

    “Would a prudent company have salted away say £5 million a year towards a potential bill? By now they would have had £20 million in the pot,”

    Sums them up, Paul. Their fear of a winning Celtic team was obviously greater than their fear of HMRC. Or, did the really expect to get away with it? Maybe they thought they were immune because of the WATP mentality. Maybe they`re just stupid Huns.
    Keep up the good work.

  2. astro

    Question: the EBT payments were loans (by law). Rangers are in financial trouble. Couldn’t Rangers be forced to claim that money from those who received it, i.e. Bain, players, coaches, …?
    If they were non-contractual, that money would add to the assets of the club, if they were contractual those owing the money would most likely try to prove that and at the same time give evidence that it was fraud.
    Where do I get it wrong?

    • Good Q
      But sh*tting on thier own will only cause more sh*t.. They believe .. Whilst trying to breathe through sh*t!!!

    • TheBlackKnight TBK

      If there were contractual or non contractual?, hmmm let’s see? an agreement for ‘discretionary loans’ never to be repaid. Let’s call them “side letters” for talking sake. What if these “side letters” stated that the loans need never be repaid, would that make them contractual or non contractual.

      Perhaps all of the parties involved misunderstood the term ‘discretionary loans’. Discretionary in terms of repayment 😉

  3. How far back does a company such as Rangers have to keep records of its business? And, given that the initial EBT-related assessment from HMRC was given to RFC in 2008, would there be a legal obligation for the company to hold on to the records prior to that date until the appeal case is concluded?
    I have a bad feeling in my waters that a great deal of stuff might be passed through the shredding machines rather than be allowed to come to light if further investigations take place.

    • TheBlackKnight TBK

      Under Companies Act (& good governance) I believe it is 10 years.

      I believe minutes of AGMs (no laughing at the back) meetings etc or decisions taken by directors of a PLC must be recorded and maintained for a period of 10 years for inspection.

      • Thanks, TBK. That’s good news. I feared that it might be only five or six years. Would this mean that the SFA and SPL were also required to retain their copies of the players’ contracts for the same length of time?

  4. Goosy

    Its pretty clear now that the SPL are waiting on the FTT result before finalising their investigation into fielding players who were improperly registered. There is a real possibility that they will not get (assuming they have already asked for) the names of the players involved in the near term This raises the possibility that the Newco parachute wil be requested by the prospective bidder before the SPL investigation has been completed
    In that situation ,will the SPL tell the prospective bidder to wait months for a decision ?
    If they don`t it means the punishment has to be decided before the enormity of the crime has been established It also rules out expulsion from the SPL as a potential sanction

    • There is a very intricate dance to be performed about the order in which the various steps for a newco parachute need to happen. I have a bunch of notes re this and will try to get them into some form of comprehensible format, even if only so that I can understand it!

      • Goosy

        Thanks Paul
        I suspect that intellectually nobody in the GOT or SFa have the capacity to make decisions at the pace needed by a prospective bidder
        We may find the MSM getting outraged that a bid is being threatened because the parchute isnt being made avilable quickly enough

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