The tax tribunal which heard fallen Scottish giants Rangers’ appeal over their bill for the use of Employee Benefit Trusts (EBT) delivered Tuesday a majority verdict which “allowed the appeal in principle”.
An EBT is a discretionary trust for the benefit of employees and has a set of trustees and a set of beneficiaries — usually the employees.
They came into being in the 1980s but were declared illegal last year.
Tuesday’s tribunal stated the “controversial monies received by the employees were not paid to them as their absolute entitlement”.
Rangers had insisted the payments, thought to be close to £49 million ($78 million), had been loans rather than wages and therefore not subject to tax.
The decision does not affect the current football club at Ibrox, now in the Scottish Third Division, which was reconstituted as a new company when the oldco Rangers was consigned to liquidation in June.
Murray International Holdings, who were majority shareholders of the oldco club until Craig Whyte’s takeover in May 2011, which preceded the club’s financial collapse, said: “We are pleased with the judgement which leaves minimal tax liability and overwhelmingly supports the views collectively and consistently held by our advisers, legal counsel and MIH itself.”
Oldco Rangers had stated they could be liable for up to £75 million but the tribunal ruled that an assessment by Her Majesty’s Revenue and Customs, the UK tax authority, should be “reduced substantially” with only some payments subject to tax.
An HMRC statement hinted at a possible appeal, saying: “We are disappointed that we have lost this stage of the court process and we are considering an appeal. The decision was not unanimous and the diligence of HMRC investigators was acknowledged by the whole tribunal.
“HMRC is committed to tackling avoidance and it is right that we challenge the type of avoidance seen in this case.”
Separate court action by HMRC in February saw Rangers taken into administration, a process that led to its expulsion from the top flight of Scottish football, with administrators later announcing the club had failed to pay about £9 million ($14 million) in tax.
Charles Green’s consortium purchased the business and assets of Rangers when they were consigned to liquidation in pre-season.
The club, the most successful in the history of Scottish football, was re-launched in the Third Division, the fourth tier of the game in Scotland, after its expulsion from the Scottish Premier League.
Tax tribunal rules in Rangers' favour
