Former Rangers owner Sir David Murray was satisfied but far from triumphant after further legal victory in the so-called ‘big tax case’.
A judge largely dismissed Her Majesty’s Revenue and Customs’ appeal against a first-tier tribunal (FTT) majority verdict which decreed in November 2012 that a £46.2million tax demand on Murray’s company, most of which referred to oldco Rangers, be “reduced substantially”.
The victory was qualified as Lord Doherty referred an unknown number of termination payments and five “guaranteed bonus” payments back to the original tribunal but Murray International Holdings (MIH) scored another win.
The judge agreed with the argument put forward at the upper-tier tribunal (UTT), that several other payments, including to Murray himself, were not special cases and fell under the FTT’s contention that they were loans and not earnings.
But, like the earlier ruling, the latest decision has no bearing on the Rangers of today, the club having been relaunched in June 2012 following the destructive reign of Craig Whyte.
MIH stated that the investigation into the near-decade use of Employee Benefit Trusts, which stopped before they were outlawed in 2010, had effectively put off respected potential buyers as the firm called for an ongoing police probe into Whyte’s takeover to be stepped up.
Murray, apparently under pressure from his bankers to recoup a club overdraft of about £18million amid huge debts in his own business empire, sold Rangers to Whyte in May 2011 in what turned out to be the most disastrous transaction in the history of Scottish football.
Whyte mortgaged future season-ticket sales to pay off the bank debt and accrued new tax debts which forced the club into administration and ultimately liquidation, after HMRC rejected an £8.5million rescue deal.
In a statement issued to Press Association Sport, a spokesman for MIH said the firm was pleased with a judgement that leaves “negligible tax liability”, although HMRC is considering a fresh challenge.
The spokesman added: “The decision substantially reduces HMRC’s claim in the liquidation of the old Rangers Football Club.
“While we have been successful in both the FTT and UTT, there are, as we have stated previously, no victors.
“This has been an exceptionally long, difficult and expensive process involving not just the FTT and UTT but also several approaches to resolve the matter with senior HMRC officials on a commercially sensible basis for all parties which were rejected.
“MIH has, at all times, recognised that the tax tribunal proceedings stemmed from arrangements put in place during its ownership. They were introduced before legislative changes removed the tax efficiency of such arrangements from the end of 2010.
“However, it is obvious that the much publicised existence of these proceedings overshadowed Rangers Football Club for many years and tarnished the external perception of its value.
“There can be little doubt that despite favourable legal opinion, potential acquirers were therefore dissuaded from pursuing their interest during a period in which we were marketing the sale of MIH’s shareholding.
“The case has also stimulated extensive press and social media comment, discussion and speculation, a significant quantity of which has been ill informed.
“During proceedings, it would have been entirely inappropriate for us to highlight fundamental misunderstandings or contribute to this public debate.
“Notwithstanding all of this, it is abundantly clear that Rangers Football Club would not have gone into administration or liquidation had the purchaser fulfilled its contractual obligations and responsibilities.
“Similar to the resolution of the UTT appeal, we hope that the relevant authorities conclude their investigations and commence proceedings at the earliest opportunity.”
As well as making a huge impact on the ownership of Rangers, the EBT issue also raised the prospect of the club being stripped of titles over their use of “side letters” detailing extra-contractual payments to players that were not registered with the football authorities.
Oldco Rangers were ultimately handed a meaningless £250,000 fine by a Scottish Premier League-appointed commission for failing to declare payments but this issue was ruled irrelevant by the tribunal.
Lord Doherty’s ruling read: “The appeal is dismissed except in so far as it relates to the termination payments.
“I shall remit the case to the FTT (i) with a direction to allow the taxpayers’ appeals against the assessments relating to the payments to the sub-trusts of Sir David Murray, his sons, Mr McClelland and Mr MacMillan; (ii) to proceed as accords in relation to the termination payments, the payments in respect of guaranteed bonuses, and any related questions of grossing up.”
A statement from HMRC read: “We are naturally disappointed with today’s decision and are considering an appeal. We win around 80 per cent of cases taken to litigation by taxpayers.
“The company, Rangers Football Club PLC, did not go into liquidation because of this tax case. It’s a matter of public record that Rangers was placed in administration by its principal shareholder and director because it was unable to pay its creditors, including HMRC.
“HMRC voted against the Company Voluntary Arrangement issued by the administration. Liquidation allows a full investigation into the conduct of the owners and financial officers which would not be possible in a CVA.
“At the time of liquidation, published court papers show that the undisputed tax that was owed by the company was approximately £21million.
“This is an entirely separate issue from the amount in dispute due to the former owner’s use of the EBT scheme.”
The main Rangers fans groups later claimed they were considering legal action against HMRC.
A statement from the Union of Fans read: “In the absence of any apparent appetite from the current board or owners of the club to hold various parties to account for the wrongs done to the Rangers, we will be liaising with oldco shareholders and all other interested parties to see what civil action can be taken against HMRC and the SFA in particular.”