Rangers broke tax rules over EBT scheme, rules Supreme Court
After two tribunal verdicts and a Court of Session verdict, HM Revenue and Customs (HMRC) has won their battle over Rangers’ use of Employee Benefit Trusts (EBTs) with it being unanimously agreed that the Scottish club broke tax rules.
Between 2001 and 2010, Rangers paid out around £50 million to 80 players, managers and club officials using the EBT scheme.
Two tax tribunals found in Rangers’ favour but as the battle raged over the tax case, Rangers went into administration and thereafter liquidation.
HMRC appealed against the tribunal decisions, arguing that the EBTs were not in fact loans but actually earnings and should be taxed accordingly, and won in the Court of Session in 2015.
The decision now means that liquidators BDO are now liable for the tax and will now have to use their creditors’ pot, reportedly to be in the region of £40 million, to pay off the taxman.
HMRC used Rangers as a test case and Wednesday’s victory could open the floodgates on similar action against clubs across the country. They could now issue Follower Notices, demanding payments from clubs and companies who ran similar schemes.
A commission led by Judge Lord Nimmo Smith had previously ruled that Rangers had gained ‘no sporting advantage’ over their use of EBTs, but this was heavily influenced by the first tier tribunal result – which Rangers won.
With the highest court in the land now ruling that Rangers broke tax rules in their use of EBTs, calls for the Ibrox side to be stripped of silverware won between 2001 and 2011 will intensify, with the SPFL and the Scottish FA facing the wrath of Scottish football.
Rangers had to pay a £250,000 fine issued by the SPL in 2013 after the old club were found to have withheld “side letters” detailing EBT payments to players in breach of league rules, in what the organisation claimed amounted to 11 years’ worth of ‘admin errors’.
The Supreme Court ruling comes on the back of the new Rangers club being knocked out of Europe at the first time of asking by Luxembourg minnows Progrès 2-1 on aggregate, in what has been described as the worst defeat for a Scottish Club in the history of European competition.