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.
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…