Rangers tax avoidance case ruling: Mike Hayes explains the background and consequences
The Supreme Court finally announced its decision in the tax avoidance case involving Glasgow Rangers on 5 July. The case concerned tax planning structures conducted by the old Glasgow Rangers Club (RFC 2012), not the company operating the Club at the present time. It involved the use of an employment benefit trust to provide loans to players and other employees. Recipients of the loans then had reduced salaries.
HM Revenue & Customs claimed that it missed out on £46.2m of tax because the club used payments to trusts in Jersey to fund tax-free loans to Rangers’ employees. The decision of the highest civil court in Scotland was that these payments should be treated as earnings and taxed under PAYE, with NIC being due as well.
Although BDO, as liquidators of RFC 2012, appealed, the Supreme Court has rejected that appeal and upheld the decision of the lower court. The consequences of this are as follows:
- RFC 2012 will be liable to the tax that the Court now says should have been paid. This will mean that other creditors will receive less in the liquidation distribution.
- Other businesses, including other football clubs, that used the same or a similar scheme will now receive Follower Notices from HMRC requiring them to pay the tax due based on this decision. This could have serious financial consequences for these businesses.
- Given the approach taken by the Court in this matter, it is very likely that any arrangement which purports to give an employee a payment that is not taxed as earnings will not work.