A lot has been written and said in the media about the alleged financial wrongdoing at Rangers, most of it inaccurate, and it’s because of these inaccuracies that other club’s supporters and other SPL clubs, as well as the SFA are on the road to punish Rangers, for acts and offences that did not take place.
The biggest failing at Rangers has been and is the failing to put the truth out there
It is with absolute disbelief that I see SPL clubs are being asked to vote of a situation that has been wrongly explained to them. This failing is Scotland’s shame.
Why did Rangers go into administration?
Despite massive coverage of the big tax case on EBT’s, the sole reason why RFC went into administration was because the short term owner, Craig Whyte, chose to not pay the club’s fiscal duties to hmrc. The petition to put RFC into administration was therefore only as a result of action taken by Whyte during 2011/2012 season.
So what about the small tax case?
Every year up and down the country sole traders, partnerships and companies are enquired into by hmrc. If any mistakes are detected then that person / company gets billed along with interest and maybe a penalty. This is just typical policing of the system and is just hmrc doing their job.
The Small TC is a typical example of this.
I would be amazed if none of the other SPL clubs, or companies run by the various chairmen have never been in this position.
Again, I should emphasize, this does not mean wrongdoing or financial impropriety.
For Rangers, they made a mistake with the beneficial share scheme, they accepted the mistake and agreed to repay what was due (which was a relatively small amount in comparison to turnover). That became payable only during 2011/12.
But under Whyte, this agreed payment was defaulted and was then rolled up with the withheld PAYE / VAT that led to the administration.
So in summary, Rangers went into liquidation for failing to pay duties that only became due during the 2011/2012 season. No wrongdoing in earlier years.
And Rangers have been punished for this, by a 10 point deduction.
So have Rangers done wrong before 2011/12?
As it stands today, no, they have not. And importantly the creditors accept that Rangers have not done anything wrong.
How do we know Rangers have done nothing wrong even if they lose the Big Tax Case?
Firstly, let’s examine what is in the hmrc statement.
“….allowing the potential investigation and pursuit of possible claims against those responsible for the company’s financial affairs in recent years..”
Taken on face value, it is said that efforts will be made to collect the duties from “those responsible”.
So who is responsible?
Clearly not Rangers as a company / employer based on this. This leaves (1) the ex-directors and / or (2) the players / employees who benefited.
So what does this mean?
It means that the Income Tax (PAYE) 2003, regulation 72(5) can be applied.
For the employees this means that while normally if a company or employer fails to deduct tax/NIC then it becomes liable for the amount due. But if hmrc are satisfied that the company / employer (1) took reasonable care to comply with these regulations, and (2) that the failure to deduct the excess was due to an error made in good faith then under condition A, the tax bill can be directed onto the individual employee, whether that be Ferguson, McLeish or whoever.
For directors, Condition B applies, which says that if hmrc are of the opinion that the director as an employee has received relevant payments knowing that the employer willfully failed to deduct the amount of tax then that director will have the tax bill directed onto them. So wallets out Messes Murray, Bain et al
But what does that mean for Rangers?
It impacts on the penalty situation if the EBTs are found to be taxable by the 1st tier tribunal.
Put simply, in order to pursue the directors or employees for the tax, there has to be acceptance that Rangers took reasonable care to comply with the tax regulations and that the tax bill on the EBTs was no more than an error made in good faith.
So it is accepted that Rangers did no wrong?
Yes, it is accepted that they as an employer, took reasonable care, and did nothing wrong.
No tax evasion.
No tax avoidance.
No financial wrongdoing.
No financial doping.
No lack of sporting integrity.
But what about “dual contracts”?
This is a false description of an EBT.
There are no 2nd contracts of service of employment. This is important.
What there is, is an agreement (at best / worst) promising a payment from a 3rd party, that party being the trust. If it is ruled that the trust payments are taxable that still does not mean that the letters constitute a contract of service. That’s a totally different argument and one that has not been pursued.
And importantly, one that cannot be pursued if it is decided to pursue others for the tax. So in summary it is already accepted that the letters are not contracts of employment, of service and as such are not liable for reporting to the sfa / spl.
If either took a different view, then it is a view at odds with that of the experts, hmrc.
So why would the SPL legitimately refuse newco Rangers admittance?
The only legitimate reason to believe that newco Rangers should be refused admittance is if the other SPL clubs reasonably believed that (1) Rangers will lose the BTC and (2) that in losing it, it will be ruled that they actually did something wrong, and didn’t just make a mistake, made in good faith.
The problem for the SPL clubs, if they want to be honest and show integrity, is that they will not know the outcome of the BTC before the vote, and even then won’t know if that outcome includes a conclusion of wrongdoing or innocent error.
So what can they do? If I was an SPL chairman, I’d put forward a proposal to allow newco Rangers to join on the basis that at the time of the vote they had not been found guilty of wrongdoing. But with a condition that if the EBT case was ruled to be taxable and if it was held that Rangers did do wrong (in comparison to just making honest mistakes) then they would be automatically relegated at the season end in Div 1. If I was representing Rangers, this is what I’d argue for.