Rangers: winning titles but cheating the taxman
The judgement by three Scottish Law Lords is as comprehensive as it is damning. Whilst Rangers FC were busy winning titles and silverware the entire basis upon which they paid many players and executives should have attracted income tax and did not do so.
Hundreds of thousands of pounds was paid in “loans” through a trust scheme which at the time was seen as a way of avoiding paying income tax. You may wonder why Rangers – and other clubs – could exist in some kind of non-PAYE parallel universe. Now the Law Lords have wondered too and simply stated that “common sense” would suggest Rangers should have paid tax like the rest of the UK does.
Further – the non payment of tax allowed the club to buy and pay players it could not otherwise have afforded. A previous legal judgement ruled that the club gained no advantage. Today’s successful appeal by the HMRC would seem to bring that ruling into question.
There is no getting away from it – the upheld appeal means Rangers were systematically cheating the taxman whilst winning titles on the pitch.
HMRC will now lodge a claim with the old Rangers company which will be substantially bigger now they have won their appeal. The taxman believes the old company still has money and they say they are due some of it now in unpaid taxation. They also point out that the old Rangers club can also appeal if they wish, to the Supreme Court.
An HMRC spokesman told Channel 4 News:
“As supported by the decision in this case, HMRC’s view is that Employment Benefit Trust avoidance schemes do not work. HMRC has collected over £1.3 billion tax through 1500 users of similar schemes.”
That is why the Rangers test case means so much. We are talking about a great number of these tax avoidance schemes and £1.3 billion clawed back from wealthy punters who may have thought they could get away with it should be applauded the length and breadth of the land today.
Clearly the old Rangers company can now appeal to the Supreme Court if they wish to dispute the law lords’ “common sense”.
— alex thomson (@alextomo) November 4, 2015
The judgement delivered by Lord Drummond Young reads:
“A scheme involving payments to various trusts set up in respect of executives and footballers employed by the former Rangers Football Club amounted to “a mere redirection of emoluments or earnings” and was accordingly “subject to income tax”.
The Lord Justice Clerk, Lord Carloway and Lord Drummond Young heard that Rangers ran these tax-avoidance trusts from 2001 to 2009.
The judges said there was a “fundamental principle” in this case that “if income is derived from an employee’s services… it is… earnings and is thus accessible to income tax”.
You have to sit back in wonder and astonishment that this simple common sense approach has taken so long and so much money spent on lawyers by the HMRC to be upheld. But we are where we are.
Lord Drummond Young said of the side-letters which were used to pay footballers extra money at Rangers:
“It seems to us to be self-evident that the obligations in the side-letter were part of the employee’s employment package, and provided him with extra remuneration. They were negotiated as part of the total employment package…it inevitably follows that those payments represented emoluments or earnings of the footballer in question.”
And thus they should have attracted a quaint old thing called income tax.
“Self-evident”…”common sense” – the judgement is festooned with phrases like this. How come it has taken so very long for such common sense and the self evident to make itself what it always should have been: obvious.
You get money. You pay tax. Even at Ibrox.