The Supreme Court has ruled in favour of Her Majesty’s Revenue and Customs following a long-running dispute over a tax avoidance scheme run by Rangers Football Club.
Lord Hodge announced in court that five Supreme Court judges had unanimously dismissed an appeal by the liquidators of RFC2012, the company formerly known as Rangers Football Club before its financial collapse in 2012.
HMRC had lost two earlier tribunal hearings over the Employee Benefit Trust scheme before a ruling in their favour in the Court of Session in Edinburgh in November 2015.
The court’s decision is not expected to have any material or financial impact on Rangers now as the club is owned by a different company but it could have broader implications for British football clubs.
Around £50m was paid to Rangers players and staff through an EBT scheme administered by the Murray Group, then majority shareholder of the Glasgow club, from 2001 to 2009. The club contended these should be classified as loans but HMRC insisted they were taxable earnings.
Former Rangers chairman Sir David Murray expressed his dismay with the verdict, saying: „I am hugely disappointed.
„The decision runs counter to the legal advice which was consistently provided to Rangers Football Club, that on the basis of the law and legal precedent at the time, the contributions made to the trust were not earnings and should not be taxed as such.
„It should be emphasised that there have been no allegations made by HMRC or any of the courts that the club was involved in tax evasion, which is a criminal offence.“
Celtic have called on Scottish football authorities to review the case and whether Rangers gained a competitive advantage through the EBT scheme but the Scottish Football Association (SFA) quickly ruled out any disciplinary action after its board sought legal advice in advance of the verdict.
„The Board of the Scottish FA notes the judgment of the Supreme Court and wishes to clarify the implications of this final legal decision from a football regulatory perspective,“ an SFA statement said.
„In light of the Inner House of the Court of Session decision, the Board of the Scottish FA sought external senior counsel opinion to ensure a robust and independent consideration of all implications of today’s judgment.
„The Board received written advice from Senior Counsel, amplified when the QC attended a full meeting of the Board to discuss his conclusions.
„Specifically, Senior Counsel was asked to anticipate whether a determination in favour of HMRC, as announced today, could imply that there had been a breach of the Scottish FA’s Disciplinary Rules as they applied at the time of the EBT payments.
„The clear opinion of Senior Counsel is that there is a very limited chance of the Scottish FA succeeding in relation to any complaint regarding this matter and that, even if successful, any sanctions available to a Judicial Panel would also be limited in their scope.
„Accordingly, having had time to consider the opinion from Senior Counsel, and having examined the judgment of the UK Supreme Court, the Board has determined that no further disciplinary action should be taken by the Scottish FA at this time.“
An SPFL spokesman said: „The Board of the SPFL notes today’s judgement of the Supreme Court. We will now take time to examine the judgement in detail and to consider any implications for the SPFL.“
The result will mean the creditors of RFC2012 will receive less money from the pot collected by liquidators BDO, as HMRC will now be owed even more money. Rangers, then run by Craig Whyte, went into administration in February 2012 over a separate tax debt and the tax authority rejected a creditors agreement in June of that year.
The verdict is a major victory for HMRC in its attempts to recoup tax from thousands of other companies which ran EBTs and similar schemes, which were the subject of a crackdown in legislation enacted in December 2010.
Tax consultant Andy Wood told Sky Sports News HQ: „There are wider implications for football clubs across the country. This is a really helpful decision for HMRC to have in their bag.
„They were given powers a couple of years ago which stated that where there was a judicial decision on a case such as this and HMRC were successful, they could then issue something called a follower notice which is a demand for an up-front payment of tax; a ‘pay now argue later arrangement’ if you will.
„A number of Premier League clubs will already have settled their EBT arrangements over the years and paid the tax owing. These were ubiquitous arrangements for football clubs as well as other businesses.
„Many top clubs have settled but there will be some clubs who have fallen from grace and slipped out of the Premier League, who do not have the funds to settle. They will be watching this decision quite carefully.“
David Richardson, director general of HMRC’s Customer Compliance Group, said: „The unanimous decision of the Supreme Court supports our view that Employment Benefit Trust avoidance schemes simply do not work.
„This decision has wide-ranging implications for other avoidance cases and we encourage anyone who’s 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.“Soccer Accumulator Bonus
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