Rangers EBT tax bill was inflated by HMRC
14 Nov 2019
Two years after the Supreme Court decision on the employee benefit trusts (EBT) dispute over unpaid tax by the old Rangers Football Club (Rangers oldco), HMRC has slashed the tax due by £26m from the original £90m bill
14 Nov 2019
The tax case ran through the courts for years, only being settled in 2017 when the Supreme Court ruled that the payment arrangements for Rangers players under individual EBT schemes were deemed to break tax rules, and were tax avoidance.
After the case, HMRC claimed at the time that Rangers oldco owed a tax bill of £90m, including interest and penalties, but this has been revised downwards.
A significant proportion of the claim of c£74m relates to interest and penalties (c£36m). The penalty element of the claim was c£24m and was levied at 65% of the tax liability due. The joint liquidators, on behalf of the company, disputed both the quantum and the principle of the penalties applied by HMRC .
The liquidators for Rangers oldco, BDO LLP, last issued an update in June 2019, when they stated that it was a ‘complex liquidation containing a number of key areas of investigation, each of which may have a significant impact on the ultimate outcome for creditors’.
On the tax issue, BDO stated: ‘As previously reported to creditors, HM Revenue & Customs’ (HMRC’s) initial claim in the liquidation was c£94m, of which c£74m related to the EBT scheme and is commonly known as the ‘Big Tax Case’. The outcome of the Big Tax Case therefore had a material impact on the dividend payable to unsecured creditors.’
BDO added that ‘HMRC also acknowledged that a further small element of their claim had been overstated and it has now submitted a revised claim of £68.3m (ie, a reduction of c£26m in total)’.
HMRC has calculated the principal element of its claim in respect of the Big Tax Case on a ‘grossing up’ basis. This element remains under review with further representations to be made to HMRC following discussions with the joint liquidators’ tax advisers’.
An HMRC spokesperson said: ‘We don’t comment on identifiable businesses. HMRC has always been clear that disguised remuneration is a form of tax avoidance.’