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The tax law that football clubs must follow has been tightened: expect legal actions shortly

By Tony Attwood

If you were following our little review of Rangers in Europe last night you will know that today they were also going to hear the result of the Supreme Court ruling in a past tax case of theirs.  Rangers has of course moved on and created itself as another company – although rather curiously one that still has achieved the championships and titles of the previous company, while not carrying the debts forward – an interesting duopoly.

As an English atheist I have no position in the sectarian and religious differences between Celtic and Rangers and I am sure there is something I have missed here, but it does seem to me a curious position that the club and  the company that owns the club are seen differently by the Scottish League.  But I pay my taxes, so probably it is always going to be completely beyond me.

However as a taxpayer I do know a little about UK law when it comes to taxation and the payment of employees, and there is no doubt now that the UK’s Supreme Court has ruled that Employee Benefit Trusts (EBTs) are payments to employees and thus taxable.  And this means every football club within the United Kingdom that has ever paid EBTs is going to be asked for quite a lot of tax.

Indeed if we look at Rangers, over £47m was paid to players, managers and directors between 2001 and 2010 in EBTs using the scheme.  That would mean that Rangers (the old Rangers, the one that no longer exists) should have paid £18.8 million to the Revenue on these sums.

As I have said, Old Rangers don’t exist no more, but where there are clubs which have not gone through liquidation, these debts can now be called in by HMRC (the UK’s tax collector).

However I wonder if HMRC could now go to the beneficiaries of the scheme – the players and perhaps the management – and ask for the money back.  I guess it is possible.  In such a case they might look to Alex McLeish,  Billy Dodds, Sir David Murray, Dick Advocaat, Graeme Souness, Jean-Alain Boumsong, Mikel Arteta, Pedro Mendes, Ronald De Boer… they have all benefited from the scheme (among many others of course), at least according to a report from the BBC.  (I can’t verify that of course – only cite the BBC as a usually reliable source).

Certainly thousands of other companies set up EBTs and similar schemes, although eventually the law was changed in December 2010 to stop any more doing so.  But as this case shows, the Supreme Court has ruled that the original law itself was sufficient to make the EBTs subject to tax anyway.

HMRC has now said in a statement, “This decision has wide-ranging implications for other avoidance cases and we encourage anyone who has tried to avoid tax on their earnings to now agree with us the tax owed. HMRC will always challenge contrived arrangements that try to deliver tax advantages never intended by parliament.”

On the tax and legal issues we have to wait and see, of course, but if Rangers have nothing to fear over forthcoming legal cases over unpaid tax, the defeat last night by the club that finished last season fourth in the Luxembourg Premier League, who before the match were 436th in the European rankings, might make them consider the loss of income this season.

They have a new manager – Caixinha – who has not real reputation to trade on to see himself through this hiccup.  True Gordon Strachan managed to start his time at Celtic by losing to the wonderfully named Artmedia Bratislava, but Strachan had a reputation which bought him time – and ultimately success came Celtic’s way.

Caixinha has nothing, but was able to judge his team on the last 10 weeks or so from last season. Caixinha was expected to take Rangers to the Europa League group stages and possibly beyond – but the group stages, rather like finishing second in the Scottish Premier League, was a minimum.   Especially this last season with Rangers finishing third in a two horse race, nine points behind Aberdeen, and 39 points behind Celtic.

Rangers imploded financially in 2012, and their collapse and relegation to the fourth tier of Scottish football is a reminder to everyone of what can happen when jolly nice fellows with fancy money making schemes take over a club.

Whether we will see such a situation in England from a major league club is hard to say, but the most likely route would be a combination of events such as

a) the collapse of broadcasting revenue and thus offers for the next round of broadcast licences that are about 10% of the current round which makes the entire squad unaffordable not just to the club, but to every other club.

Plus

b) the removal from the scene of certain airlines after their sponsoring middle eastern countries either go to war with each other, or at least continue their blockade of one of their number.

Football always goes into the future thinking that what happened yesterday will happen tomorrow, but the collapse and humiliation of Rangers should be a lesson to anyone interested in football’s broader aspects, that just as in the rest of reality, nothing is guaranteed.

The problem in Scotland of course is quite different from anything in England – for while we have six clubs all of which harbour thoughts of sharing the trophies between them next season in Scotland St Johnstone are already trailing to a club from Lithuania in the Europa.  Aberdeen might do better next season, but who exactly is going to challenge Celtic?

Although for us, being in the Europa might be more fun than we thought.

Caixinha has talked up the notion of taking Rangers back to a place in the European hierarchy, but that has now been put on hold, I guess – although a win against Celtic in the league (unlikely though that might seem at the moment) would probably make some of their fans forget and forgive the experience in the Grand Duchy.

But for the rest of us, it will be interesting to see exactly which football clubs the Revenue turns its attention to next – and exactly what happens to Rangers in the coming season.

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5 comments to The tax law that football clubs must follow has been tightened: expect legal actions shortly

  • para

    And so the great “gift horse” football is being tapped of it’s money.

    This is probably only the first in a range of “legal” schemes designed to relieve football of some dosh.

  • Menace

    Tony as an atheist you will never know because ‘Only God knows what’s going on’. That is what the politicians say when questioned about anything.

  • The_Ledge

    Interesting that this story broke POST election. No doubt it’s an attempt by the government to prove that it’s prepared to take on tax dodgers. But starting with football clubs might not be the right place to start! Much better to look at WHY Virgin Health is being given lucrative NHS contracts when:

    (1) The NHS is funded by the UK taxpayer and
    (2) Virgin Health’s parent company is registered in the British Virgin Islands and
    (3) Pays no UK tax.

    So Rangers, and any other unfortunate Football Club in their position might easily ask the Supreme Court to establish from HMRC, what constitutes Tax Minimalisation and what constitutes Tax Avoidance.

    Could be a long process!

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