Big Rangers Administration/Liquidation Thread - All chat here!

[Thistle_do_nicely]

What's the bullshit count up to now for Dave King?

"I have a NOMAD lined up to start within weeks" to "It was always my preference to delist from the Stock Exchange."

"My investment is not contingent on being found fit and proper" to "My investment, er, *is* contingent on being found fit and proper"

"My dad wasn't really that keen on football" to "My dad was a proud unionist Proddy that loved the colour orange, songs about famine, and the Queen"

"That money was just resting in my account" to "I don't want to go to jail for the rest of my life, so here's a lot of money, South African revenue service"

"A sporting advantage may have been gained" to "Any advantage was for the company since it meant that shareholder's didn't have to put more money in, so that's okay."

edit: and the ever diminishing amount of money that he promised as investment... which I think he later had the brass neck to say "Er, when I talked about investing £30 million into the club I actually meant over a few years with the bulk of that invested capital coming from fans."

Edited November 15, 2015 by Thistle_do_nicely

[scottxs]

54 Championship Titles all won on the field of play...I am proud of every one of them, our nearest rivals only have won 42, none of their decent fans would dare claim the 4 they stole, while our brave boys were off fighting for their country.

Richard Gough......take a bow

greenied just for the trolling that made me laugh. bit like your club/company has for the last few years

[THE KING]

Lies

I accept all the verdicts

What I do not accept is 5 minute accountancy experts opinions like yours, who like to pretend terms like Tax evasion and illegal were used in the cos...they weren't, so roon ye.

Hod on! Are you suggesting that if a COS judgement doesn't contain the word "illegal" or "illegally" then nothing illegal happened?!

[Njord]

Long , but interesting.

November 5, 2015 0 0 Blog, The Mechanics of Secrecy

The Offshore Game, a TJN-supported site dedicated to looking at tax havenry in sport, published this long article about Scotlands Rangers football club yesterday. It is important not just for the interests involved, but because of principles at stake, not least concerning discretionary trusts (see our primer on trusts here.)

Update: UK barrister Jolyon Maugham has commented on this case, on Radio Scotland. He said he expects this case to be successfully appealed (we disagree) but he added, dramatically:

If this decision is not appealed to the Supreme Court or the Supreme Court decides in HMRCs favour on an appeal, it will knock out almost all if not all employee benefit trust planning. So it is an incredibly powerful decision.

He added that he thought there would be rather more than 5,000 such schemes in operation in the UK: so this is indeed a big deal.

We should add as something of a riposte to Maugham (who wasnt very specific about the reasons why he expects the case to be successfully appealed) that public opinion has shifted decisively in this area, and Supreme Court judges do pay great attention to the public mood.

See also the January 2015 Taxcast on the Rangers offshore disaster.

Anyway, the following article also reminds us of how this kind of stuff tax dodging via offshore arrangements distorts competition in markets as

we explained recently. Heres the OG article, in full.

RANGERS LOSE THE BIG TAX CASE WHAT NOW?

Today, the Court of Session in Scotland ruled in favour of Her Majestys Revenue and Customs in the Big Tax Case. The Big Tax Case was a challenge to Rangers use of an offshore tax avoidance scheme to pay its players.

This is the first victory for HMRC in what has become a very long running court battle, over what was seen as a test case by HMRC. For that reason the ruling is likely to have widespread repercussions for the offshore tax avoidance industry.

For Rangers (or rather for creditors of the company, now in liquidation), the ruling is likely to bring some finality to the matter. But for some of the individuals involved, including in the governance of Scottish football, the result could also be very serious.

At Offshore Game Towers weve been combing though the judgement. Heres our analysis.

BACKGROUND

First a quick recap on what the Big Tax Case was about. The case looked at a particular tax avoidance scheme used by Rangers to pay its players between 2001 and 2009. The scheme was set up by Rangers owners, the Murray Group, on the advice of Paul Baxendale Walker, who since leaving the tax advisory profession has become a pornographer.

The scheme was complex, but in broad terms worked like this: Players would receive a small amount of their payment though a normal contract with the club. This contract would be registered with the SFA in the normal way and income tax paid on it. However the player then would sign a separate agreement with the club to receive money though an offshore trust. Payments made to the trust were not part of the contract and not declared to the SFA or HMRC. In Rangers case that trust was based in Jersey.

The club would make payments into a primary trust which had a set of sub trusts attached to it. On paying the money it would ask the trust to make a payment into a sub-trust set up in the name of a player. The player would then write a letter to the sub trust expressing who he wanted to benefit from the trust. That was normally members of his family. However, the beneficiaries did not need to be paid immediately, the benefits could come many years in the future. In the interim, the trust loaned the money to the player. In total there were 108 sub trusts, each for the benefit of a named player or employee.

Trusts work by inserting a layer of control in between people that can be useful for tax (and sometimes other) purposes. In this case the layer was between the club and player. In theory the club was not paying money to the player but to the the trust. The trustees, the people controlling the trust, controlled the money. They did not have to obey the wishes of the player, they did not have to make loans to him and they could also have recalled those loans. What that means is that the players could make the argument that the money that they had was not guaranteed to come to them and was given to them at the discretion of the trustees of the trust (whoever they may have been) and not the club as part of their employment.

HMRC disagreed and counted the money as payment for employment, and cited in evidence the side agreements signed between the club and player over payments to the trust. They demanded £50m in back taxes for the scheme. Rangers challenged the decision and went to a tribunal. The tribunal ruled in Rangers favour. HMRC appealed, the second tribunal also found in favour of Rangers so HMRC appealed a second time to the Court of Session, the Scottish equivalent of the Court of Appeal.

THE DECISION

The Court of Session ruled today that both the lower and the upper tax tribunal were wrong. The payments to the players were payments that came as a result of their work as players and as such they should have been taxed. The fact that the money was paid to a third party was irrelevant. Once the payment had been made for work it was income and it was the players choice to redirect their income somewhere else. The club should have withheld the tax when the payments were made under PAYE rules.

Reading the judgement there is an elegant clarity of thought from the court. The judges stress that in essence this is a simple case in paragraph 56 of their judgement:

The fundamental principle that emerges from these cases appears to us to be clear: if income is derived from an employees services qua employee, it is an emolument or earnings, and is thus assessable to income tax, even if the employee requests or agrees that it be redirected to a third party. That accords with common sense.

And the court is really quite scathing of the conclusions of the tax tribunals. The court says it has had at times difficulty in understanding the reasoning of the tribunals. The court goes onto say that any realistic view of the transactions can only come to one conclusion. Given that the conclusion differed from that of the tax tribunals, that is a fairly damning statement. The relevant passages from paragraphs 57 to 60 of the judgement are below:

This principle is ultimately simple and straightforward indeed, so straightforward that in cases where elaborate trust or analogous relationships are set up it can easily be overlooked.

That, it seems to us, is what happened before the First-tier and Upper Tribunals in this case.

It must be determined whether the payments by the relevant employer into the Principal Trust, and in due course the payments from the Principal Trust to the various sub-trusts, were derived from the employment of the employees in question. If they were, they amounted to the employees emoluments or earnings.

It is very obvious that they [the payments] were derived from and based on the work done by the particular employee. On any realistic view of the transactions under consideration, that conclusion is inevitable. The First-tier Tribunal considered that the benefit was a mere discharge of an employers obligation to an employee, but that ignores the manner in which any such obligation arose.

The First-tier Tribunal expressed the view that the obligation in the side-letter was not an emolument, as it was a discharge of an employers obligation to an employee. We have difficulty in understanding this statement. It seems to us to be self-evident that the obligations in the side-letter were part of the employees employment package, and provided him with additional remuneration.

The court has ordered that the original tax assessments by HMRC stand.

TAKEAWAYS

1. Rangers unlikely to appeal

This latest ruling now brings finality to this matter. Strictly speaking Rangers could appeal to the United Kingdom Supreme Court, but this seems unlikely to happen. The Supreme Court exists to clarify difficult and contentious points of law. It can choose which cases it hears and only does so if the case has a real chance of success or if there is an important national issue that needs to be addressed. Where a lower court has made a ruling that is clear cut and expresses no doubt about their conclusions it is difficult (but not impossible) for the case to be taken up by the Supreme Court.

As can be seen from the passages quoted above, the Court of Sessions judgement today is very clear cut. The judges have done a thorough and comprehensive job in analysing all of the relevant case law and legal issues going back to the 1930s and how they might apply to this case. They even have taken the time to consider arguments that it appears were not advanced by HMRC. At the end of this process they have come to a very clear and unambiguous decision. It was written like a judgement that that will be extremely difficult if not impossible to appeal.

That said, there are many live cases involving EBTs with a great deal of money at stake, if the current case is taken as setting precedent. So watch this space

2. A case with wide implications

A key point that was made by the Court of Session was the simplicity of the underlying principles in this case, and the attempt by Rangers to confuse the issue with complexity. Was it ever any other way? So much of the tax avoidance industry relies not on the cleaver use of tax rules, tax breaks and loopholes, but by creating complex structures that are so difficult to penetrate that tax authorities cant see what is really going on, even if they try. Todays ruling cuts though all of that that, and separates the source of the payment, from the way in which it was paid.

There was little discussion of whether the trusts really were discretionary, or the relative powers of the trustees, there was no analysis of whether the arrangements set up were real with real legal effect or whether they were a sham (the complicated issue that tribunals tried to grapple with). As far as the court was concerned there were payments arising out of the players work, whatever complex, convoluted offshore scheme you use to launder those payments through is irrelevant.

Employee benefits trust schemes like that in the Big Tax Case were used by a number of Premiership football clubs (although apparently a number of them settled rather than go to court) and were marketed by tax advisers to a wide range of people. The Big Tax Case was seen by HMRC as a test case which it would use to establish the law and pursue others. Expect more people to start settling with the HMRC over the coming months. (Although per the above, watch this space)

3. Rangers could lose titles

Perhaps the biggest and most serious consequences could come for Rangers.

In order to support the tax avoidance scheme, Rangers did not declare the payments they made into the trusts to the SFA. A subsequent inquiry established by the Scottish Premier League and led by Lord Nimmo Smithfound that the payments were in contravention of SFA rules.

However the inquiry did not recommend a sporting penalty but only a financial penalty. In other words the SPL fined Rangers pounds not points.

Key to this decision was the finding that Rangers were not doing anything unlawful. At the time of the inquiry the tax tribunal had ruled in favour of Rangers. After the way that the courts so comprehensively trashed the decision of the tribunal today, it is difficult to see how there isnt an argument for looking at the issue again.

But there is more. The Nimmo-Smith inquiry rested their decision not to award a sporting penalty on the idea that Rangers had not received any indirect competitive advantage from the scheme. Of course it is obvious that as they didnt pay taxes (at 40%) the club had more power in the market to buy better players. But Nimmo-Smith concluded that as the scheme was legal, it was open to any other club to arrange their affairs in the same way.

The fact that Rangers had believed that they needed to break SFA rules by not declaring the payments was irrelevant. The tax tribunal had said that they would have found the scheme to be legal even if Rangers had declared the payments to the scheme. Other clubs could have set up the same tax avoidance scheme and kept within the SFA rules and so were not disadvantaged by Rangers breaking the rules.

It is difficult to understate how big a call this was. The tax scheme that the court ruled on today was in action for 9 years, during which Rangers won the Scottish Premiership 3 times. They came in the top three the other 6 years, giving them a place in European competition. Had Rangers been docked points it could have lost these titles and other clubs could have said they had been excluded unfairly from European competition.

The judgement today directly addresses the issue of competitive advantage in paragraph 62:

So far as the footballers are concerned, at least, it seems to us that if bonuses had not been paid they might well have taken their services elsewhere. We realize that the fifth respondent [Rangers 2012] was in, potentially, a difficult financial position, competing for good players in an international market where other countries may not have the same rigorous approach to taxation as the United Kingdom.

Nevertheless, the law is clear: the payments made in respect of footballers were in our view derived from their employment, and thus the payments were emoluments or earnings.

In other words Rangers won titles based on operating a scheme that was unlawful in its tax implications, and therefore not open to other clubs with which it was competing.

Where did that leave Scotlands game? Was the competition during 2001-2009 a fair one? Was there a subsequent failure to address the sporting consequences?

Fans of Rangers saw the club go into liquidation following the tax risks taken by their board (and financial secrecy remains a major issue, with a major court case facing many of those involved in the new companys establishment).

Fans of other clubs have seen the outcome of their major competitions distorted, at best, by tax manipulation over the best part of a decade and the apparent failure of Scottish football authorities to respond appropriately.

This is, in our view, the real problem with clubs playing the offshore game: football ends up being the loser, and with it the fans.

END

http://www.taxjustice.net/2015/11/05...case-what-now/

One of the interesting things is even if they do appeal, the Supreme Court doesn't need to hear the case, they could just throw them a deafy

[Joey Jo Jo Junior Shabadoo]

I'm amazed that Rangers currently aren't up their ears in high class, international players. Apparently it is of zero consequence how much they get paid, after all.

[Gaz FFC]

Must've been a bugger knowing for all their ducking and diving that I'm sure DM knew would catch up with them 1 day, that on many occasion Celtic still beat them to titles and were for most of the EBT years by far the better team.

Kind of seems like a giant waste and totally not worth it

[THE KING]

HMRC consider appeal as they concede Rangers tax case defeat

What a waist of money that would be

and what point of law will they appeal on?

LOL.

[Joey Jo Jo Junior Shabadoo]

"Waist of money". Belter.

[Monkey Tennis]

Kincardine also kept saying at FTTT time, that there was no way that HMRC would appeal.

Hopelessly wrong.

[mjw]

What has Jim Spence done to get the Sons of struth chasing him on twitter?

It's all very (un)dignified.

[bennett]

What has Jim Spence done to get the Sons of struth chasing him on twitter?

It's all very (un)dignified.

Guessing, I'd say he's been trolling again/trying to impress his pal Phil and the SOS guy disagrees with wee pingy.

[bennett]

I am convinced Tom English is one of our resident BRALT posters.

https://twitter.com/DerekMillerTime/status/665872383379664896

Just not sure which one, quite a few fit the bill

Especially like this bit

"No fair mind will ever accuse them of cheating"

[williemillersmoustache]

cheat

tʃiːt/Submit

verb

gerund or present participle: cheating

1.

act dishonestly or unfairly in order to gain an advantage.

Don't take my word for it or even that of celebrated journalist Tom English. The dictionary seems quite clear.

[jim999]

Slight tangent. I know the findings may be appealed to the Supreme Court. BUT from what I've heard it's possibly unlikely Hector will come after the players. An expert type fella on Radio Scotland said as much last week. I've always been led to believe with any tax issues ignorance is never an excuse. Our wee business in its early days has been chased by the tax man and they are brutally relentless (not complaining)

Given the players at the time employed agents to represent them and advise them where does that leave the player/employee and the agent who advised? should Hector go on the hunt? An agent gets a percentage so avoiding tax is maybe in the agents best interests? No?

Is it really the case ignorance is no excuse? Can an agent get done for giving bad tax advice?

We all know Boumsong was really uncomfortable with his contract and Dodds only answered questions as he had no choice but these guys cannot possibly all be thick???

[mjw]

Guessing, I'd say he's been trolling again/trying to impress his pal Phil and the SOS guy disagrees with wee pingy.

Hmm.

A tweet about events in Paris seems to have been the start of it.

No trolling, no Phil.

[Monkey Tennis]

cheat

tʃiːt/Submit

verb

gerund or present participle: cheating

1.

act dishonestly or unfairly in order to gain an advantage.

Don't take my word for it or even that of celebrated journalist Tom English. The dictionary seems quite clear.

I'm reluctant to accuse Rangers of "cheating". This is because it's a damming charge and it's generally challenged, or at least used to be.

It's difficult to see which part of that definition doesn't fit what they did, perfectly well though.

[williemillersmoustache]

I'm reluctant to accuse Rangers of "cheating". This is because it's a damming charge and it's generally challenged, or at least used to be. It's difficult to see which part of that definition doesn't fit what they did, perfectly well though.

I'm not. What they did, is literally the dictionary definition of cheating. Calling it anything else is the same as "back", "out of liquidation" and "we've been punished enough". Trite, meaningless spin designed and created by well paid PR types in an effort to avoid the harsh reality that for a significant period of time, every kick, header, corner, ill-judged back pass and competition in Scottish Football was tainted for everyone. And utterly meaningless for Rangers.

[bennett]

Hmm.

A tweet about events in Paris seems to have been the start of it.

No trolling, no Phil.

No it wasn't, Jum took a PIC of his local paper article and posted it on twitter, the SOS guy laughed at it and wee Jum said don't call me jum, plus took umbrage at his article being laughed at.

[MRF-LCC-RFC]

I'm not. What they did, is literally the dictionary definition of cheating. Calling it anything else is the same as "back", "out of liquidation" and "we've been punished enough". Trite, meaningless spin designed and created by well paid PR types in an effort to avoid the harsh reality that for a significant period of time, every kick, header, corner, ill-judged back pass and competition in Scottish Football was tainted for everyone. And utterly meaningless for Rangers.

Rangers didn't cheat with EBT's mate, read this statement:

http://rangers.co.uk/news/headlines/dave-king-statement-5/

Do you not think that, Aberdeen

are financially doping themselves and cheating when you consider that, Rangers are the most watched team in Scottish Football Live on TV, yet Rangers only receive like 1-2% of the total SPFL TV Money pot, and Aberdeen etc. all receive like 7% plus. Just because they are in Premiership at the mo.

[energyzone]

Rangers didn't cheat with EBT's mate, read this statement:

http://rangers.co.uk/news/headlines/dave-king-statement-5/

Do you not think that, Aberdeen

are financially doping themselves and cheating when you consider that, Rangers are the most watched team in Scottish Football Live on TV, yet Rangers only receive like 1-2% of the total SPFL TV Money pot, and Aberdeen etc. all receive like 7% plus. Just because they are in Premiership at the mo.

With 500m worldwide fans and the Dallas Cowboys anxiously tuning in to every game it's no wonder you're pulling in figures like that.