The following report has been sent in the form of a letter/complaint to the Public Accounts Committee.
It is also in the possession of a leading MSM outlet in Scotland.
It is the summary of 3 years research and investigation – its now up to others to do their duty.
It is now a matter of record that Sir David Murray offered, unsuccessfully, to settle with HMRC in relation to Ranger’s use of EBT’s. HMRC themselves emphasise the importance of measures outside litigation.
We queried whether HMRC’s litigation strategy for avoidance cases is too cautious. We have heard in the past from the major accountancy firms that they would continue to promote avoidance schemes even when there was a 50% chance of these being successfully challenged.34 HMRC told us that last year it defeated 30 avoidance schemes and protected £2.7 billion through litigation. It said it is proud of its 80% success rate in avoidance cases, arguing that its high level of success is an important deterrent 35 HMRC emphasised the importance of measures outside of litigation. For example, it has not taken Employee Benefit Trusts to court, and sees reaching a settlement as the most effective way of resolving them. Unlike marketed avoidance schemes which often have a large number of followers , Employee Benefit Trusts tend to be bespoke, making individual case – by – case litigation costly.
Such alternatives are laid out in HMRC’s document:
How we resolve Tax Disputes,
The Tax Assurance Commissioner’s
Annual Report 2013-14
and include measures such as Resolution via Collaboration and Alternative Dispute Resolution which includes either mediation of facilitated discussion between the parties.
As a shareholder I would be interested to know if any of these alternatives to litigation were pursued by HMRC in the case of Rangers, and if not why not, given their written commitment to such processes.
DUTY OF CARE/EARLY INTERVENTION/INFORMATION SHARING
This section reflects on opportunities missed, perhaps due to absence of protocols, clear pro-active guidelines and policies on early intervention.
I have spoken personally to the journalist who wrote that article, Mr Keith Jackson of the Daily Record & Sunday Mail. He still has in his possession the relative documentation which substantiates the veracity of that article. These documents can be made available to the Public Accounts Committee should they be required.
I would also direct you to the summary of Craig Whyte’s Directorship Disqualification.
and would highlight the following extract:
All of the foregoing liabilities had arisen in the period between 01 September 2011 (after the limited company acquired the majority shareholding in RFC and he was appointed as a director of RFC) and February 2012, a period of five and a half months. Tixway UK Limited (“Tixway”) 2. Mr Whyte failed to ensure that Tixway maintained and/or preserved adequate accounting records, or if such records were maintained, he failed to deliver them up to the Liquidator. As a consequence of his failure to comply with his statutory obligations, the Liquidator has been unable to establish what has happened to apparently substantial assets of Tixway or, more generally, to verify the business activities and trading history of Tixway. In particular, the Liquidator has been unable to: 2.1 account for the substantial change in position as between Tixway’s last audited accounts (for the period to 31 January 2010) which showed Tixway as having fixed assets of £1,103,190 represented by “investments” and total current assets of £1,403,658 (comprising debtors of £923,856 and cash at bank and in hand of £479,802), and its current position which, according to the Liquidator’s latest estimated statement of affairs, is a deficiency of £3,017,918; 2.2 identify the investments recorded as owned by Tixway as at 31 January 2010 such that he is unable to account for or realise those assets for the benefit of Tixway’s creditors; 2.3 identify the debtors recorded in the accounts to 31 January 2010 and establish whether such debts remained outstanding or seek to collect the debts for the benefit of Tixway’s creditors; 2.4 identify the location of any cash sums held on behalf of Tixway and collect such sums for the benefit of Tixway’s creditors, only one bank account in the name of Tixway having been identified by the Liquidator which account held a balance of only £51,340 as at 31 January 2010; 2.5 verify the nature and purpose of transactions recorded in the one known bank account or establish that such transactions were for the legitimate purposes of Tixway’s business, credits to the known bank account over the period 01 April 2008 to 27 June 2012 totalling £1,955,709 and debits over the same period totalling £2,072,994; 2.6 establish whether Tixway had any employees, (HMRC having informed the Liquidator that Tixway did not operate a PAYE scheme) and/or whether any remuneration was paid to you (the known bank account showing payments to Mr Whyte personally totalling £100,875 over the period from 20 July 2009 to 22 May 2012);
There appears to have been a considerable failure of due diligence by Sir David Murray with regard to Mr Craig Whyte. The latter’s failure to declare to the Scottish Football Association, a previous directorship disqualification (Vital UK Ltd for a period of 7 years) whilst his fraudulent scheme involving Ticketus came to fruition (for which he now faces criminal prosecution) saw him gain control of Rangers. His stewardship of Rangers was characterised by a course of conduct which had brought him previously to the attention of HMRC i.e. failure to contribute to PAYE and VAT payments.
Throughout this series of developments and perhaps worthy of future consideration and exploration, is that the fact that at this time HMRC were in possession of information which, had the Scottish Football Association been granted access to, or been made aware of, may have prevented much of the subsequent damage and carnage which unfolded. This is in no way an attempt to apportion blame onto HMRC but more an exploration of the mechanisms such as information sharing protocols which may provide both shareholders and potential creditors a measure of protection from unscrupulous characters such as Craig Whyte. At what point, if any, is a government investigative agency, holding information which may afford protection to a company, its shareholders and those with whom it trades, obliged to share such information to beneficial parties? If the answer is never then perhaps that failing needs to be explored.
The ramifications of Craig Whyte’s stewardship of Rangers have been calamitous for all of Scottish Football, resulting in reduced revenue, reduced sponsorship and job losses.
Sue Walton, head of HMRC’s anti-avoidance group writing in the Tax Journal 21 April 2011:
“Realistically, though, we know that there will always be a need for targeted intervention to respond to the way that particular customers choose to behave.”
Later in the same article she states:
“To recap then, HMRC’s approach to compliance is, first and foremost, to minimise the need for enforcement – it is in everyone’s interests to do that. But where a risk of non-compliance is identified, we aim to detect that as early as possible and resolve it as quickly as we can.”
Given HMRC’s knowledge of Craig Whyte and the way he was likely to behave, why did it take them a full 9 months to intervene in the case of Rangers, by which time a huge bill had been allowed to accrue?
With HMRC’s failing to act in accordance with their own written commitments it is not hard to understand why many Rangers shareholders feel that quite simply HMRC were giving Craig Whyte “sufficient rope to hang himself” and both the club, the company, the shareholders and the subsequent creditors were all considered worthy collateral damage in bringing that to fruition.
BREACHES OF CONFIDENTIALITY/MISDIRECTION
As alluded to by yourself during the aforementioned Public Select Committee, the Rangers FC tax travails received considerable media attention.
As shareholders in the company many of us were particularly concerned by one particular aspect of such coverage, and that was coverage which had at its heart material relating to the business dealings of the company which would normally be considered “confidential”
Two sources were of particular concern:
(1) The Rangers Tax Case Blog – This was an anonymous blog on the internet which featured almost daily fresh material of a confidential nature relating to Rangers tax dealings. It also offered “interpretation” of the confidential material it was publishing, and normally such interpretation was particularly slanted to infer Rangers guilt. To understand both the scope and effect of this website allow me to quote from journalist Tom English writing in the Scotsman newspaper on 25.11.2012
“If you wanted to know the latest news on their tax travails, rangerstaxcase was a place you went because, unlike newspapers or radio stations, rangerstaxcase was connected to the heart of the FTT and everybody knew it.
It had documents and detail that were beyond dispute. When illustrating one point it was making it would summon up information that could only have come from somebody within, or very close to, the tribunal”
In 2012 the Rangers Tax Case Blog won the Orwell Prize, the judges citing was as follows:
‘The 2012 Blog Prize showed that not only could blogs comment on current events, they could drive stories forward. Rangers Tax-Case takes what might be a dry topic – the tax affairs of a sports team – and shows how a striving for transitory success has severely distorted sporting, legal and ethical boundaries. Displaying focused contempt for those who evade difficult truths, and beating almost every Scottish football journalist to the real story – Rangers Tax-Case shows how expertise and incisive writing can expose the hypocrisies the powerful use to protect themselves from the consequences of their actions. It is a worthy winner which not only proves that independent blogging is as healthy as it ever was, but also offers a mirror in which our times are reflected.’
Following the decision of the Upper Tax Tribunal in favour of Rangers the anonymous blog not only shut down, but also deleted all its files.
(2) The Men Who Sold the Jerseys – BBC Scotland Documentary. This documentary was broadcast on national television (BBC Scotland & Northern Ireland) on the 23rd March 2012. Again at the heart of this documentary were numerous confidential documents which BBC Scotland later published on their website.
This documentary was also a recipient of an award – the Foreign Press Awards Sports Story.
HMRC have a legal duty to protect such information.
HMRC has a legal duty to protect the confidentiality of taxpayer information. HMRC take all reasonable steps to protect any information you submit via the website, both online and offline, in accordance with legislation such as the Data Protection Act 1998.
HMRC take all appropriate steps to protect your personally identifiable information as you transmit your information from your computer to the HMRC site and to protect such information for loss, misuse, and unauthorised access, disclosure, alteration, or destruction. HMRC use leading technologies and encryption software to safeguard your data, and operate strict security standards to prevent any unauthorised access to it.”
These two outlets of confidential information were the subject of numerous complaints to HMRC from Rangers shareholders clearly concerned about the breaches of confidentiality.
To say HMRC’s response to these complaints was underwhelming is a considerable understatement. Shareholders received the same generic response from HMRC – “HMRC do not comment about speculation about breaches of confidentiality”
Further complaints to Government Ministers such as David Gauke MP and Danny Alexander MP were referred to HMRC’s Ministerial Correspondence Unit (Keeley Spindler) who again offered the generic response aforesaid.
I would have thought that HMRC’s pledge to take “all appropriate steps” would have included taking complaints from shareholders seriously, and not dismissing an award winning web blog publishing “documents and details which were beyond dispute” and a BBC Scotland documentary, broadcast on national television, as mere “speculation”.
Did HMRC investigate these complaints from Rangers shareholders highlighting various instances of breaches of confidentiality?
The seizing of documentation by HMRC in the Rangers Tax Case would have involved the cataloguing of evidence for future use. Did HMRC cross reference their catalogued evidence against the confidential information appearing in the public domain?
If so what were their findings and what action did they take? Furthermore what duties and responsibilities are placed upon them in the event of the theft or loss of evidence?
In February 2013, the SPL’s Independent Commission, chaired by Rt Honourable Lord Nimmo Smith, assisted by Nicholas Stewart QC and Charles Flint QC, published its conclusions following its investigation into EBT use by Rangers in what is referred to as the SPL Independent Commission Report. Section 98 of their Report contained an extraordinary revelation.
“Meanwhile, BBC Scotland came, by unknown means, into possession of what they described as “dozens of secret emails, letters and documents”, which we understand were the productions before the Tax Tribunal. These formed the basis of a programme entitled “Rangers – The Men Who Sold the Jerseys”, which was broadcast on 23 May 2012. BBC Scotland also published copious material on its website. The published material included a table containing the names of Rangers players, coaches and staff who were beneficiaries of the MGMRT, and how much they received through that trust.”
The term “productions” is of course legal jargon for evidence.
Therefore one of the outlets of confidential information (BBC Scotland) which was the subject of complaints from Rangers shareholders, which HMRC dismissed as “speculation about breaches of confidentiality,” appear to have sourced that confidential material courtesy of evidential items seized by HMRC for use in the tax tribunal. Whilst I obviously cannot confirm it, I think it is safe to assume that the unauthorised removal of evidential items would be facilitated by theft.
Were HMRC aware of such a theft and what were their duties and responsibilities with regard to this?
Following the ruling of the First Tier Tax Tribunal in November 2012, both Sir David Murray and I lodged criminal complaints with, what was then, Strathclyde Police in respect of the various breaches of confidentiality. This led to the subsequent instigation of a Police criminal enquiry. The fact that this was the instigation of a Police enquiry would suggest that no previous complaints had been received in respect of either breaches of confidentiality nor theft of evidence.
In view of the foregoing, I would also ask you to consider, at what point a public body, is so neglectful, so grossly incompetent, that their behaviour warrants consideration of criminal negligence.
On Wednesday 16th July, 2014, you participated in a question and answer session with executive level officers from HMRC as part of the compilation of the HM Revenue & Customs Annual Report 2013-14.
At question 54 you table a question to Mr Jim Harra, Director General Business Tax, HMRC, who suggests the question in itself is a “misapprehension” and responds as follows:
“It has been in the media. This dispute on employee benefit trusts was not the reason why Rangers went into liquidation. It was for non-payment of their standard pay-as-you-earn and VAT obligations.”
I would respectfully suggest that is wholly inaccurate. Rangers FC [Oldco] went into liquidation due to a series of events in which HMRC themselves played an integral part, some of which forms the subject of this report, culminating in their rejection of the CVA proposed by Mr Charles Green, and furthermore, that the original question tabled by yourself, represents a far more accurate summary of the sequence of factual events.
In conclusion it is clear there are several areas of inconsistency with regard to public commitments made by HMRC and the actual service level delivery of such commitments. There are also serious concerns as a consequence of HMRC’s apparent dismissal of bona fide complaints highlighting serious breaches of confidentiality.
Many thousands of Rangers supporters and shareholders have previously signed a petition requesting a full and public Government Enquiry into this whole affair. The recent high profile arrests and forthcoming prosecution of 4 individuals, will once again put the events into the media spotlight, but additionally, it will also make available facts and circumstances previously unknown to the general public.
Whilst I feel the gravity of the concerns highlighted herein would be best served by way of full and public Government Enquiry, I fully accept that the Public Accounts Committee may be aware of information that the general public are not privy to.
If you do not feel that the interests of the public would be best served by such an enquiry, I would at least respectfully request that the various concerns and inconsistencies outlined above would be directed to executive level officers via the Public Accounts Committee.