Generic Sevco / Rangers meltdown thread

[CyberSauzee]

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And was it not also confirmed in writing (the undeclared side letters). Or have I misunderstood their function?

No, you're correct.

When players were signing for Rangers FC (in liquidation), they were told they were getting x amount as a basic salary, plus all this extra cash going into this trust (EBT).

Understandably the agents for these players said we'll need that in writing; the so called 'side letters' that explicitly stated the player will have money placed into their trust.

These letters have lead to the 'imperfectly registered' players at the SFA, as this income was known about but not part of the contract lodged (pun intended) with the SFA. These signed letters though are a written contract, so in effect the old Rangers were playing players who were not properly registered. Punishments for this vary across different leagues and footballing authorities. For league matches it's generally loss of points, cup competitions it's disqualification or replay the game.

CWG and the other CAs on here can correct any inaccuracies, bit I think that's the gist of it.

[gramskiwood]

https://www.channel4.com/news/hmrc-w...ers-tax-battle

[Keith_M]

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He was a "porn-baron" (Whatever TF that is... perhaps 1 rank below a Porn-Duke) before his name surfaced in the RFC case. He also owned Loaded for a while.

There's plenty goss on him out there. eg...Struck off as a solicitor for impersonating an HMRC officer.

Maybe it's a strict hierarchy.

Porn Star, Porn Duke, Porn Baron... Knight to King Porn, etc.

[Offside Trap]

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A succinct summary from CA Tax magazine. Much better than the nonsense in the Record today.

Tax advisers generally, together with employers with similar Employee Benefit Trust (EBT) arrangements, have been waiting for seven years for this final judgement to emerge. It is therefore pleasing to have a final, binding decision which can now be relied upon by employers and their tax advisers. Having followed the debate through two tribunal hearings and a Court of Session hearing, it is clear that the unanimous Supreme Court judgement handed down by Lord Hodge, which has been the best part of four months in the making, has also been a difficult and complicated process.

The three key issues being reviewed by the Supreme Court were whether the £47+ million paid from offshore EBTs to over 80 players and staff did in fact constitute earnings under ICTA 1988 and ITEPA 2003; whether the deeming provisions within the legislation were sufficient to capture the payments as earnings and whether each recipient was sufficiently close to the funds that this meant they had been placed unreservedly at their disposal.

Lord Hodge agreed with the First Tier Tribunal dissenting judge Dr Poon’s assessment that “the legislative code for emoluments has primacy over the benefits code in relation to loans”. This appears to have been a crucial deciding factor in this case, and the main reason for the Supreme Court’s decision that the three key issues pointed towards earnings from an employment, making the payments liable to PAYE and NICs.

It now appears that BDO, liquidators to Rangers Football Club, will be liable for any taxes deemed to be due under this ruling. It is unclear whether the players who were the original beneficiaries of the EBT could be asked to pay any back taxes by HMRC.

It is important to note that since the 'Rangers' EBT was first set up, tax practice and attitudes to tax avoidance have moved on. The introduction of the DOTAS (Disclosure of tax avoidance schemes) rules, changes to penalty regimes and more recently the introduction of accelerated payment notices and follower notices have changed the climate. Additionally, all the main professional bodies for tax advisers have agreed to revised Professional Conduct in Relation to Taxation rules, which establish standards in relation to tax planning.

Thanks for this article CWG. But I don't understand the part in bold. Why would BDO be liable here??

[greenginger]

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Thanks for this article CWG. But I don't understand the part in bold. Why would BDO be liable here??

I think it means BDO as the organisation responsible for distributing the liquidated Rangers FC 's creditors pot.

Means creditors will get about 5p in the £, instead of 10p .

Still its 5p more than poor sods who were ordinary Yam creditors.

[Ozyhibby]

https://www.channel4.com/news/by/ale...ent-silverware


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[Tynie01011973]

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I think it means BDO as the organisation responsible for distributing the liquidated Rangers FC 's creditors pot.

Means creditors will get about 5p in the £, instead of 10p .

Still its 5p more than poor sods who were ordinary Yam creditors.

Yes, BDO are in charge of the liquidation of Oldco Rangers and the distribution of the remaining assets between all Creditors of the Oldco.
HMRC were already the largest creditor but now the SC ruling now adds the Big Tax Case liability to the debt due to them. This will probably result in no other creditors getting any money, just like UKIO with HMFC.

[CropleyWasGod]

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Yes, BDO are in charge of the liquidation of Oldco Rangers and the distribution of the remaining assets between all Creditors of the Oldco.
HMRC were already the largest creditor but now the SC ruling now adds the Big Tax Case liability to the debt due to them. This will probably result in no other creditors getting any money, just like UKIO with HMFC.

All ordinary creditors, including HMRC, will get the same p/£ dividend.

The only way they will get nothing is if the Wavetower case goes against BDO, and the legal action against Duff & Phelps fails.

(For reference, the last BDO report showed £15m in the pot. There's a legal action against Duff & Phelps for £28m. Wavetower's claim is £18m. )

Ordinary creditors are, IIRC, around £160m, including the EBT tax.

[Alan62]

Should BDO not be trying to recover the tax amount from the players via the trusts? Presumably the trusts still exist and they do have the power to recall the loans either in full or part?

If that money can't be recovered, or if HMRC can't go after the individuals involved for unpaid tax then would that mean that the ruse of using a trust to protect income from tax could still be used?

[JeMeSouviens]

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The contributions to the trusts were exactly that. They were not earnings. He is right about that.

However, he is blowing smoke about the actual issue. It is the payments BY the trusts that are the earnings.

The adviser, by the way, was in the adult industry before he became a tax specialist. Just another way of ****ing people for money.....

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... he featured in one of Mark Daly's BBC documentaries and revealed that the Huns went against his specific advice, which was that nothing should be written down that would make the payments seem contractual. Of course, football agents were never going to go on a nod and a wink ...

[ballengeich]

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These letters have lead to the 'imperfectly registered' players at the SFA, as this income was known about but not part of the contract lodged (pun intended) with the SFA. These signed letters though are a written contract, so in effect the old Rangers were playing players who were not properly registered. Punishments for this vary across different leagues and footballing authorities. For league matches it's generally loss of points, cup competitions it's disqualification or replay the game.

It's worth remembering that Lord Nimmo-Smith's inquiry didn't punish Rangers for not paying tax, but did find that they had fielded players who were "imperfectly registered". As you correctly remark the penalty is generally loss of points. LNS decided just to impose a fine, stating that EBT schemes were available to all clubs so Rangers had not gained a sporting advantage.

In 2014 Livingston were penalised 5 points for non-payment of tax on bonus payments. The amount involved was trivial compared to the sums systematically concealed by Rangers. The punishment for Rangers seemed very slight at the time and now that their EBT scheme has been declared invalid the case should be revisited as the premise on which the punishment was based has been shown to be incorrect. I hope Hibs will back Celtic's call for the SPFL to re-examine the case.

[CropleyWasGod]

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Should BDO not be trying to recover the tax amount from the players via the trusts? Presumably the trusts still exist and they do have the power to recall the loans either in full or part?

If that money can't be recovered, or if HMRC can't go after the individuals involved for unpaid tax then would that mean that the ruse of using a trust to protect income from tax could still be used?

The loans weren't from the company, though. They were from the Trusts. In that light, BDO have no power to recall them. As I understand the set-up, the loans are only repayable to the Trusts when the recipient wants to repay it, or when they die.

On your last point, there is new legislation proposed which would prevent that.

[Hibernia&Alba]

Good statement from Aberdeen fans. The sentence in bold is the nub of the issue: it's called cheating:

Dons Supporters Together have urged those in power to punish the Glasgow giants after the Supreme Court on Wednesday ruled in favour of HRMC over the Ibrox club's use of Employee Benefit Trusts (EBTs).

Celtic later that day released a statement that called on league chiefs to review their initial ruling which in 2013 found no further action should be taken because the use of EBTS did not give Rangers any "unfair competitive advantage".

The SFA then put out a statement of their own that said "no further disciplinary action should be taken".

However, Aberdeen fans groups Dons Supporters Together are not satisfied and have called for the Ibrox side to be stripped of the 14 trophies the club won during the EBT years of 2001 to 2010.

A statement read: "Dons Supporters Together aim to represent the Aberdeen FC supporting community and have done since their inception. Those supporters that travel home and away, week-in, week-out and spend a fortune while doing it.


"We all appreciate that the Scottish Football League has its faults and its critics. But, we fully expect, and it is our absolute right, that the sport we love and invest in is fair and honest.


The Ibrox club lost the ruling at the Supreme Court (Photo: Getty Images Europe)

"On 5th July 2017 the Supreme Court backed HM Revenue and Customs in its fight with Rangers FC over their use of Employee Benefit Trusts between 2001 and 2010. This allowed Rangers FC to recruit members of staff of a certain quality that they could not ordinarily afford. Rangers FC undisputedly cheated the taxman to win 14 trophies.

"Dons Supporters Together share the view with supporters who have invested in the Scottish game, that Rangers FC should be stripped of the 14 trophies won during these EBT years.

"We now appeal to the Scottish football authorities, media, supporters and clubs in Scotland to review this matter and re-instate our trust in those running the game."

The SPFL, which later took over the running of the league after the merge of the SFL and SPL, said on Wednesday they "consider any implications for the SPFL".

[Crazyhorse]

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Petrie is on SFA board so is he in agreement with their statement that they will do nothing?

Dempster is on the League board who will look into it.

Celtic the only club so far to comment - does anyone expect Hibs to make a public comment, and do you think they should?

Yes I do. If we agree that Rangers gained an unfair sporting advantage/mis-registered players then not to do so would be to condone their cheating/rule breaking.
Can anyone put the case to me for Hibs remaining silent on this?

[Hibernia&Alba]

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Yes I do. If we agree that Rangers gained an unfair sporting advantage/mis-registered players then not to do so would be to condone their cheating/rule breaking.
Can anyone put the case to me for Hibs remaining silent on this?

I'd like to see every club in Scotland release a joint statement.

[CropleyWasGod]

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Yes I do. If we agree that Rangers gained an unfair sporting advantage/mis-registered players then not to do so would be to condone their cheating/rule breaking.
Can anyone put the case to me for Hibs remaining silent on this?

I think there may be more mileage in going down the "fans' voice" route, as Aberdeen have. IIRC, it was the combined voice of supporters that forced the clubs' hands when voting on the RFC/SPL membership back in 2012.

(disclaimer; I'm not volunteering to organise it....)

[bigwheel]

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Yes I do. If we agree that Rangers gained an unfair sporting advantage/mis-registered players then not to do so would be to condone their cheating/rule breaking.
Can anyone put the case to me for Hibs remaining silent on this?

against the wind of views here...but my view is that this is a retrospective decision. What was viewed as acceptable tax / benefits handling has now been declared unlawful. Therefore, I find it hard to view that it was "cheating"...aggressive tax and benefits handling yes - but until yesterday it was not illegal.

I feel it's a bit weird that HMRC can win a case that results in change on things that have already happened...that is a big can of worms for many businesses and individuals..

[Bostonhibby]

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Yes I do. If we agree that Rangers gained an unfair sporting advantage/mis-registered players then not to do so would be to condone their cheating/rule breaking.
Can anyone put the case to me for Hibs remaining silent on this?

There isn't one but I think it might be wise to see what action the SPFL take. Petrie is one of the board members (?) and maybe it's not great timing,if the SPFL are going to take action, for Hibs to get in first?

Having said that I expect it to be covered up in some way that the vast majority of us won't like.

Maybe another pet QC'S opinion to hide behind like the sfa

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[oldbutdim]

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There isn't one but I think it might be wise to see what action the SPFL take. Petrie is one of the board members (?) and maybe it's not great timing,if the SPFL are going to take action, for Hibs to get in first?

Having said that I expect it to be covered up in some way that the vast majority of us won't like.

Maybe another pet QC'S opinion to hide behind like the sfa

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No he isn't.

[CropleyWasGod]

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against the wind of views here...but my view is that this is a retrospective decision. What was viewed as acceptable tax / benefits handling has now been declared unlawful. Therefore, I find it hard to view that it was "cheating"...aggressive tax and benefits handling yes - but until yesterday it was not illegal.

I feel it's a bit weird that HMRC can win a case that results in change on things that have already happened...that is a big can of worms for many businesses and individuals..

It's not really retrospective. HMRC told RFC many years ago that, in their opinion, they were breaking the law.

Laws are written with an intention. With the best will in the world, though, they're not always very clear. So some people interpret them one way, and some another. The clarification then plays out in the Courts.

That's how Case Law has built up in tax practice for decades. And it's how this case has played out.

[Ozyhibby]

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against the wind of views here...but my view is that this is a retrospective decision. What was viewed as acceptable tax / benefits handling has now been declared unlawful. Therefore, I find it hard to view that it was "cheating"...aggressive tax and benefits handling yes - but until yesterday it was not illegal.

I feel it's a bit weird that HMRC can win a case that results in change on things that have already happened...that is a big can of worms for many businesses and individuals..

The non disclosure of 2nd contracts was as against the rules then as it is now. They cheated and the knew they were cheating which is why they hid the contracts.


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[Hibernia&Alba]

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against the wind of views here...but my view is that this is a retrospective decision. What was viewed as acceptable tax / benefits handling has now been declared unlawful. Therefore, I find it hard to view that it was "cheating"...aggressive tax and benefits handling yes - but until yesterday it was not illegal.

I feel it's a bit weird that HMRC can win a case that results in change on things that have already happened...that is a big can of worms for many businesses and individuals..

But we all know EBTs weren't illegal per se at the time; it was a question of misuse, and they've been found guilty. They bought an advantage by inappropriate use of a financial scheme. The highest court in the land gave a unanimous decision - they cheated.

[Hibernia&Alba]

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It's not really retrospective. HMRC told RFC many years ago that, in their opinion, they were breaking the law.

Laws are written with an intention. With the best will in the world, though, they're not always very clear. So some people interpret them one way, and some another. The clarification then plays out in the Courts.

That's how Case Law has built up in tax practice for decades. And it's how this case has played out.

[Bostonhibby]

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No he isn't.

You're right as he's done his stint. Leann is though. So is Ann Budge. Well known for her desire to do the right thing.

Interesting times ahead.

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[Ozyhibby]

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You're right as he's done his stint. Leann is though. So is Ann Budge. Well known for her desire to do the right thing.

Interesting times ahead.

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Budge may be wary of any investigation widening into Hearts affairs though.


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[Bostonhibby]

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Budge may be wary of any investigation widening into Hearts affairs though.


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Aye, sarcasm intended but we haven't got a smiley for it

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[bigwheel]

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It's not really retrospective. HMRC told RFC many years ago that, in their opinion, they were breaking the law.

Laws are written with an intention. With the best will in the world, though, they're not always very clear. So some people interpret them one way, and some another. The clarification then plays out in the Courts.

That's how Case Law has built up in tax practice for decades. And it's how this case has played out.

From their view though, they have a set of corporate tax lawyers who were telling them they were OK. And two courts (until yesterday) agreed with them...I can't comment on the "two contracts" point mentioned elsewhere- as I don't know that detail..but I sort of recall you come from an accounting background - you will perhaps then acknowledge that as tax handling gets more complex it is often hard to get definitive views - even from the HMRC. Sometimes, you need to go with there advice you are getting and take the risk. Banks and Corporate Tax experts told them they were OK...On this occasion it has come up heads, when they bet tails...

[CropleyWasGod]

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From their view though, they have a set of corporate tax lawyers who were telling them they were OK. And two courts (until yesterday) agreed with them...I can't comment on the "two contracts" point mentioned elsewhere- as I don't know that detail..but I sort of recall you come from an accounting background - you will perhaps then acknowledge that as tax handling gets more complex it is often hard to get definitive views - even from the HMRC. Sometimes, you need to go with there advice you are getting and take the risk. Banks and Corporate Tax experts told them they were OK...On this occasion it has come up heads, when they bet tails...

They had a guy who was struck off as a solicitor in 2007 for conflicts of interest. That was it.

I'm not sure whether they sought a second opinion (people rarely do, but it would make sense to), or to what extent they shopped-around. However, as has been said, they didn't take his advice fully, in that they recorded the arrangements by way of the side-letters. So, in short, they were okay, but they didn't do it the way they were told to.

My instinct in taking this sort of advice is to make sure that the adviser has adequate Indemnity Insurance, so that you can sue the hell out of them if things go wrong.

[Geo_1875]

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From their view though, they have a set of corporate tax lawyers who were telling them they were OK. And two courts (until yesterday) agreed with them...I can't comment on the "two contracts" point mentioned elsewhere- as I don't know that detail..but I sort of recall you come from an accounting background - you will perhaps then acknowledge that as tax handling gets more complex it is often hard to get definitive views - even from the HMRC. Sometimes, you need to go with there advice you are getting and take the risk. Banks and Corporate Tax experts told them they were OK...On this occasion it has come up heads, when they bet tails...

At the same time they had HMRC giving a different opinion. That's why they ended up in court and lost.

[bigwheel]

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At the same time they had HMRC giving a different opinion. That's why they ended up in court and lost.

well that happened later...and the HMRC view in these conversations is rarely definitive...Rangers certainly took a higher risk approach though, that's for sure.