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How tax rules were broken by Rangers FC

November 12, 2015 | Financial Saviour

Following the news last week that Glasgow-based Rangers FC were judged to have broken tax rules after two failed appeals by HMRC, Financial Saviour decided to take a look at exactly how the case evolved.

The “big tax case”, as it had become known, was first brought to public knowledge in 2010 when it was revealed that Rangers’ use of Employee Benefit Trusts (EBTs) had allowed the club to make numerous tax-free loans to players, coaches and other staff between 2001 and 2010 when Rangers played in the SPL: Scottish football’s top league.

In early-September this year, following investigation, the BBC released a list outlining the individuals who received loans from the club’s benefit trust, along with the specific amounts give to each. You can view the list here.

Kris Boyd

Current SPL record scorer Kris Boyd was one of the players who received a loan from Rangers as part of the EBTs.

HMRC, the Government’s department of tax, claimed these loans were breaking the rules of tax avoidance, and that the club consequently owed millions of pounds in unpaid tax, fines and interest over this nine-year period.

This dispute led to a tax tribunal in late-2012, where it was ruled that Rangers’ use of EBTs under David Murray; the owner of the club when these schemes first started being used, were legal.

Following an appeal by HMRC which was originally dismissed in July 2014, the case still lingered as several issues were referred back to the original panel. Another appeal made by HMRC in this time has now been upheld by three senior judges at the Court of Session in Edinburgh.

David Murray

David Murray first bought Rangers FC for £6m in 1988. Image from www.bbc.co.uk.

It was ultimately ruled that if the money had been loaned as a consequence of the employees’ services to the club, then this is classed as a payment or earnings, and therefore assessable to income tax, according to the judges.

This decision does not affect the current owners of Rangers FC who bought the club from David Murray in 2011 just months before entering administration and then liquidating the club altogether.

A consortium that took control of the assets belonging to Rangers saw the club reinstated into the bottom level of the Scottish Football League for the start of the 2012/13 season, where the club has subsequently gained two promotions in three years, and within touching distance of returning to the Scottish Premier League.

Murray can, however, still choose to appeal against this latest ruling, which means that a final ruling could still be years away.

For any help and advice with tax disputes and tax tribunals, get in touch with Financial Saviour today. We are an experienced team of finance experts who understand the importance of tailoring our approach for every unique set of circumstances.

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