Rangers lose big tax case; Rangers win big tax case. In Scotland both can be true

By Tony Attwood

As I have tried to say each time in the past that I have covered a story about Rangers and their financial issues, I am not Scottish, and my knowledge of Scottish football is at a distance.  I have been to Scotland, I have watched football in Scotland, and I have watched Rangers home and away.  And I live near the English town of Corby which until about five years ago had a large and bustling Rangers supporters club, which I used to pass on my way to and from work.  But I can’t be called an expert on matters Scottish.

But still the Rangers case is fascinating, just as was the case of Portsmouth, to go to the other end of the Kingdom (not literally but roughly).  A big club that went down to the bottom division of the league.  A club that got engaged in strange financial deals arranged by people who in retrospect you might actually not wish to be involved in your club.

So now, after what seems to have been 1000 years of trial and tribulation the Court of Session in Scotland has ruled in favour of Her Majesty’s Revenue and Customs (the UK tax office) in what is known as the “Big Tax Case”: the challenge to Rangers’ use of a scheme to pay its players in a way that avoided paying tax.

The case could go to appeal, but it seems unlikely because the chairman of what is now Rangers (not the same Rangers that benefited from the tax scheme), has said, “The football team had no advantage from any tax savings.”   So that really knocks out any appeal, after all you’d look a bit silly appealing a case from which you had no benefit.

However this is a change in stance from the position that we reported the chairman making in 2012: “We owe the Scottish footballing public an apology. I follow the logic of the argument that if we lose the tax case then we probably gained some competitive advantage. We should apologise for that.”

HMRC is involved in a very long battle with football in the UK.  It doesn’t like the “football creditors rule” in England, and it certainly didn’t like what it saw as (and what the court found to be) offshore tax avoidance in Scotland and in England.

For Old Rangers (now in  liquidation and so worthless), the ruling is at best a logical embarrassment.  They won the league with players who used the tax avoidance scheme.  For New Rangers now playing in the Championship in Scotland, it is fairly irrelevant save in relation to whether it can continue to count the trophies won by Old Rangers using the tax scheme, as part of its heritage.

One very interesting part of the whole affair is that the tax scheme in question was set up by was set up by Paul Baxendale Walker, who either originally or since was a pornographer (depending on which articles you read).  It might help if you use catch-up TV to watch the French series “Hard” (shown on Sky Arts) from the start.

In essence Rangers’ players received money though a trust based in the Channel Island of Jersey – and thus outside EU jurisdiction.

In a bizarre and convoluted scheme each player had to write a letter to one of the sub-sections of the trust to say he would like to benefit from the trust at some point in the future and would also, if it wasn’t too much trouble, like a loan in the meanwhile.

So the players were not paid extra money, that money went to the trust which after duly considering all the facts and looking at various competing claims (oh, there were none) paid out.

HMRC said it was a farce, as obviously it was, and asked for £50m in tax please, and thank you.  The Scottish Court of Appeal said, “of course it is a farce” although in rather more legal language.

The fundamental principle that emerges from these cases appears to us to be clear: if income is derived from an employee’s services qua employee, it is an emolument or earnings, and is thus assessable to income tax, even if the employee requests or agrees that it be redirected to a third party.  That accords with common sense.

And we might say, “Cor luv a duck and no mistake!  Common sense in a court of law.  Whatever next!”

Of course Rangers were not alone in this.  It is widely acknowledged in the underworld of tax that a fair number of Premier League clubs in England were playing the same game, but unlike Rangers they settled when they saw their number was up.

This is because an inquiry by the Scottish Premier League found that the payments were in breach of the Scottish FA rules but not unlawful – because this ruling hadn’t reached the public arena by this time.  Now it has been seen as illegal.

Also the enquiry by the FA suggested that Rangers, because they had not done anything illegal, had not gained any underhand advantage.  But the fact that they didn’t pay tax now is being cited as an advantage during the nine years they ran the scheme when they won the league on three occasions.

As the ruling says,  So far as the footballers are concerned, at least, it seems to us that if bonuses had not been paid they might well have taken their services elsewhere.

In one sense it is irrelevant since the club that won those championships is now in liquidation but there is a technical point – should the current Rangers club for whom Gideon Zelalem plays, be allowed to count those three championships as its own?

A similar situation arose with Juventus when they were found cheating by manipulating referees and TV companies to their advantage.  They were docked various trophies, but ignored the ruling and continue to count them as their own.

Meanwhile Rangers have commented on what they see as the misleading information that has been published and said, “We would like to correct some misleading information that has been circulating on what is described as the “Big Tax Case”.

“For the avoidance of doubt, Rangers have not lost the case. There is no question of any liability impacting on our club, its history or any member of the Rangers International Football Club plc Group.

“The Rangers Football Club and the entities which currently own and manage it are not party to these proceedings nor do we have any say in what happens. The proceedings are a matter for those affected by them.”

So there we are.  Unless there is an appeal, which seems unlikely, that ‘s the case that we have followed from afar, finally dealt with.  Rangers were guilty.  Or not.

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Woolwich Arsenal the club that changed football, is now available on Kindle at £9.99.  For more details and to buy a copy please click here or go to Amazon Kindle and search for Woolwich Arsenal.

And some anniversaries

• 17 November 1984: Arsenal 1 QPR 0.  Tony Adams started his first long series of games as Arsenal gained their first win in five attempts.
• 17 November 1990: The deduction of two points from Arsenal following the Man U game appeared in the league table for the first time.