The case centres around the use of employee benefit trusts (EBTs) in Jersey that paid tax-free loans to players and staff between 2001 and 2009, which HM Revenue & Customs claims robbed the public purse of £46.2m ($56.4m, €53m) in unpaid tax.
The EBTs allowed Rangers Football Club PLC, which entered liquidation in October 2012, to pay loans to employees on the basis that the money would be paid back.
However, HMRC claims that the loans were in fact payments that should have been subject to income tax and national insurance charges (NIC).
The Rangers Football Club Ltd, which emerged after the liquidation of its 140-year old predecessor, is not involved in the ongoing tax dispute.
After a two-day hearing in London, the case ended on Thursday with the presiding judges expected to make their final decision within the next six months.
Moving the goalposts
Tom Wesel, partner at Milestone International Tax Consultants, strongly criticised HMRC’s pursuit of Rangers, saying that the taxman is “victimising” Rangers and “going around like gangsters extracting protection money from football clubs by selective reinterpretation of the law prior to 2011”.
Wesel said: “HMRC is moving the goalposts by adapting an argument it succeeded with in dispute with a footballer back in 1991. The court decided [a £75,000 ‘golden hello’] was part of his pay for his subsequent transfer and so taxable as salary.”
EBTs
The use of EBTs was popular in the late 1990s until 2010 when HMRC introduced legislation to curb their use.
Former chancellor George Osborne announced a crackdown on EBTs as part of the anti-avoidance measures in his 2016 Spring Budget. He said the measures were designed to “stop tax evasion, prevent tax avoidance, and tackle imbalances in the system”.
Legal history
The long-running dispute kicked off in 2012, when a first-tier tribunal found in favour of liquidator BDO that the payments were not earnings and therefore not subject to income tax and NIC.
The upper tribunal refused HMRC’s appeal in 2014, but the Scottish court of sessions agreed that the payments amounted to a re-direction of income in November 2015.
The Scottish court of sessions granted permission to BDO to appeal to the UK supreme court.
