:00:10. > :00:13.on a broader peace package in the next 48 hours, it could become an
:00:13. > :00:17.inevitability. Tonight on Newsnight Scotland:
:00:17. > :00:20.Did Rangers football club go to the wall for nothing? Today they won
:00:20. > :00:23.the big tax case that has been hanging over them for three years.
:00:23. > :00:26.So does HMRC have questions to answer over the conduct of the case,
:00:26. > :00:31.and what are the implications for the club?
:00:31. > :00:37.Good evening. To say this is a long-awaited result is a bit of an
:00:37. > :00:39.understatement. The potential liability of up to �94 million has
:00:39. > :00:42.undoubtedly been a factor in Rangers' difficulties. But today's
:00:43. > :00:52.victory may seem rather hollow to the now third division club. So how
:00:53. > :01:00.
:01:00. > :01:06.Rangers are at the top of the Third Division. A brand new company which
:01:06. > :01:12.is still be custodian of this sporting legacy of one of Europe's
:01:12. > :01:21.greatest football teams. But not its financial liabilities. Old
:01:21. > :01:29.Rangers were a team that reached for the sky, at home and abroad.
:01:29. > :01:35.What a goal! Now in liquidation, but it looks as if the old team may
:01:35. > :01:42.have won a final victory over the taxman and the use of employee
:01:42. > :01:52.benefit trust so. Employee benefit trust are widespread. When there
:01:52. > :01:58.
:01:58. > :02:02.were first introduced it was HMRC it authorised -- HMRC authorised.
:02:02. > :02:09.The idea was assets would be put into a trust and then were
:02:09. > :02:14.distributed among the whole workforce in a tax-efficient manner.
:02:15. > :02:24.For nearly 10 years, the odd club used trusts to make payments of
:02:24. > :02:27.millions of pounds to players and staff, up but HMRC argued this
:02:27. > :02:33.amounted to tax avoidance and wanted tax and national insurance
:02:33. > :02:39.to be paid. At one point it was estimated that Rangers could owe it
:02:39. > :02:44.�94 million if they lost the beak tax case. But old Rangers 1. The
:02:44. > :02:49.tax adviser he was partly responsible for bringing the Skene
:02:49. > :02:57.to Rangers may well be feeling vindicated tonight. It is only a
:02:57. > :03:03.problem if HMRC win. If they don't win, hopefully they will come back
:03:03. > :03:11.and say it all the Rangers fans want to thank you because you
:03:12. > :03:17.single-handedly saved Rangers FC �50 million. You Ara hero.
:03:17. > :03:22.years, the owner of Rangers have been trying to sell it, but with
:03:22. > :03:28.the possibility of such a huge bill hanging over the club, no-one was
:03:28. > :03:38.interested. He ended up selling it for just �1. The old Rangers were
:03:38. > :03:38.
:03:38. > :03:48.forced into liquidation by HMRC after a -- over a smaller tax bill.
:03:48. > :04:12.
:04:12. > :04:16.Meanwhile, HMRC are considering an Today's decision and any appeal
:04:16. > :04:26.went affect the Rangers team that is now playing. It is a new and
:04:26. > :04:31.
:04:31. > :04:41.separate company. But there are two big questions. One, did HMRC's case
:04:41. > :04:41.
:04:41. > :04:44.against Rangers fail? Secondly, did a great teenage lead disappear for
:04:44. > :04:48.nothing? I'm joined now by Neil Patey,
:04:48. > :04:56.partner at accounting firm Ernst & Young. Were you surprised by the
:04:56. > :05:06.decision? The not totally. Complicated tax legislation, there
:05:06. > :05:06.
:05:06. > :05:12.are lots of issues involved and it wasn't a clear cut decision.
:05:12. > :05:16.Correct me if I am wrong, but it revolves around a very narrow and
:05:16. > :05:24.point. It was deemed that these trusts, the beneficiaries of them
:05:24. > :05:34.did not have full control over them and therefore they counted as loans.
:05:34. > :05:35.
:05:35. > :05:40.Exactly. Were they learns or were they remuneration? -- loans.
:05:40. > :05:44.the tribunal come to any conclusion on any of the things that were
:05:44. > :05:51.claimed during the hearings, in that the money did not have to be
:05:51. > :05:57.paid back? There was talk about it would not be paid back until such
:05:57. > :06:07.time as a player had died and then the loan could be set against
:06:07. > :06:14.
:06:14. > :06:17.inheritance tax. Some of the trusts were ten-year loans and they're all
:06:17. > :06:27.different to the individual circumstance. And it appeared some
:06:27. > :06:32.of them didn't pay it any interest. Everything was different and that
:06:32. > :06:36.is why it took so long to go through all the details. If they
:06:36. > :06:45.are loans, as they have concluded, is there a suggestion they might
:06:45. > :06:53.have to be paid back? Ultimately, yes. They will be repayable in the
:06:53. > :06:59.player's lifetime come on or on their death. But the trust was set
:06:59. > :07:04.up typically for the benefit of the player's family. So in other words,
:07:04. > :07:14.it does not mean that the creditors of Rangers get any money back?
:07:14. > :07:21.
:07:21. > :07:25.Absolutely not. This is money was put into trust by old Rangers.
:07:25. > :07:30.the trustees are in some cases as a pin you are suggesting that the
:07:30. > :07:35.players themselves, or their families, and let's say a player
:07:35. > :07:38.dies and the loan is paid back and is paid to the trust, not to
:07:38. > :07:45.Rangers' Paul Murray Holdings, isn't the money effectively been
:07:45. > :07:55.paid by people to themselves? trustees will be the beneficiaries
:07:55. > :07:58.
:07:58. > :08:08.and will have the power to decide to what is done with the money.
:08:08. > :08:10.
:08:10. > :08:16.issue here - it must be a blow for HMRC? It is right that they should
:08:16. > :08:19.pursue unpaid tax when they think it is due. A but this was quite a
:08:19. > :08:28.strategy. They decided British football was a law unto itself.
:08:29. > :08:37.There was the court case involving Harry Redknapp. They lost that.
:08:37. > :08:45.They have now lost this one. What is the strategy go from here? --
:08:45. > :08:51.where does the strategy go from here? This is probably a setback,
:08:51. > :08:55.but every case will be different. The detail is important, even
:08:56. > :09:05.within the sub trusts themselves. You can't necessarily say they
:09:06. > :09:07.
:09:07. > :09:13.would lose any other cases with Surely there will be tax lawyers
:09:13. > :09:17.saying, icy, if we do it this way, that is all right? With any tax
:09:17. > :09:24.legislation, people always look at tax planning within the law. If the
:09:24. > :09:27.Revenue stop a loophole -- spot a loophole, then legislation can be
:09:28. > :09:33.changed to close it down. Do you think that is more or less likely
:09:33. > :09:37.as a result of this? It is like the judicial route is not working.
:09:37. > :09:41.situation like this, I imagine HMRC will look at their findings and if
:09:41. > :09:46.they think it was used in a certain way it was not meant to be, they
:09:46. > :09:52.can change legislation to make it clear how we should be used. Do not
:09:52. > :10:01.go away, let's bring in Tom English, chief sports writer at the Scotland
:10:01. > :10:06.on Sunday and Ian Davidson, glass slope -- Glasgow's MP. There will
:10:06. > :10:09.be a lot of Rangers fans watching this thinking, hang on a minute, OK,
:10:09. > :10:14.maybe technically the reason the club went bust did not have
:10:14. > :10:18.anything to do with it, but if this had not been hanging over Rangers,
:10:18. > :10:22.David Murray would never had sold the club for a pound to Craig White
:10:22. > :10:26.and all that happened would not have happened. And the club would
:10:26. > :10:29.not be in the Third Division with little hope of getting back to the
:10:29. > :10:33.top for several years. Yes, and they would have a fair point if
:10:33. > :10:40.they thought that. The only reason the club was sold for a pound was
:10:40. > :10:43.because they had this big tax case, the Sword of Damocles, hanging over
:10:43. > :10:49.Ibrox. No responsible owner would get involved in Rangers when there
:10:49. > :10:53.is a potential �70 million bill. Possibly due to be paid. It allowed
:10:53. > :11:02.Craig White in the door, we all know what happened after that.
:11:02. > :11:06.Rangers fans will say, if this was ago, we would never have heard of
:11:06. > :11:08.Craig White, the club would either be in David Murray's hands or a
:11:09. > :11:14.responsible and I would have come in and there would have been none
:11:14. > :11:18.of this. Do you agree with that? To some extent, supporters of Rangers
:11:18. > :11:24.could feel they have a raw deal. Yes, in particular the fact that
:11:24. > :11:30.the tax tribunal evidence was all completed by 11th May. I understand
:11:30. > :11:36.that the club expected the judgment in 20th November 11. That then
:11:36. > :11:41.judged on. If that huge tax case had been removed from the situation,
:11:41. > :11:45.clearly some other buyer might well have come in to publish -- purchase
:11:45. > :11:52.the club and we would not be where we are. Not withstanding, we need
:11:52. > :11:56.to look at the big picture. The big picture really is that while
:11:56. > :12:01.Rangers up -- Rangers' tax avoidance schemes have been found
:12:01. > :12:05.to be legal, they are not morally justifiable in any way. I do not
:12:05. > :12:09.think anyone can defend richly paid footballers avoiding tax in the way
:12:09. > :12:13.that they have while the supporters that pay their wages struggle to
:12:13. > :12:21.five -- survive economically difficult times. Hang on, the
:12:21. > :12:26.problem... I think that tax avoiders was not part of the
:12:26. > :12:30.tradition of Rangers. I three -- if we had fans on the board, this
:12:30. > :12:36.would not have happened. problem with the last point to make,
:12:36. > :12:40.the results of this case will rather encourage others to do the
:12:41. > :12:44.same. For example, there are at least 22 banks and investment
:12:44. > :12:50.trusts in the City of London who through their hands up and said, we
:12:50. > :12:54.will just pay the money. They did not fight it. But now, as we were
:12:54. > :12:57.talking about earlier, there will be tax lawyers up and down the
:12:57. > :13:01.country trying to devise strategies to achieve precisely what you say
:13:01. > :13:06.you do not want. Absolutely, and that is where this case goes far
:13:06. > :13:10.wider than Rangers, it ties into Amazon and Starbucks and the rest
:13:10. > :13:13.of it. People who have lots of money and want to avoid taxes,
:13:13. > :13:22.managed to get highly-paid accountants and Lewis to find ways
:13:22. > :13:28.around the system, -- glorious to find ways around the system, and it
:13:28. > :13:33.is not for their point The question is of transparency. It is about
:13:33. > :13:36.having all the paperwork available to the fans. I do not think if had
:13:36. > :13:41.happened to Rangers had fans been there from the beginning. This has
:13:41. > :13:47.been a rich businessman's scan, it has not been defensible in any way.
:13:47. > :13:52.To some extent, David Murray dug a hole that the club has fallen into.
:13:52. > :13:55.Nothing in the judgment, Rangers fans may feel aggrieved, but
:13:55. > :14:02.nothing in the judgment held the club in its current predicament of
:14:02. > :14:07.being in Division Three. No, this is all an Old Court issue. The only
:14:07. > :14:12.thing that could transfer to the new courts is the ongoing
:14:12. > :14:19.investigation into contract by the SPL, and this decision could its
:14:19. > :14:24.impact the SPL contracts are decided. The tribunal did not come
:14:24. > :14:27.down on one side or another on this very specific issue on whether
:14:27. > :14:31.these so called side agreements the players had should have been
:14:31. > :14:36.reported to the Scottish football authorities? No, that was not a
:14:36. > :14:39.matter for this tribunal. That is a separate investigation for the SPL.
:14:39. > :14:44.What do you think will have pulled -- happen with that? Is the SPL
:14:44. > :14:50.case undermined? You could say yes because of the out come here, but
:14:50. > :14:56.the dissenting voice in that three- person tribunal is one woman who
:14:56. > :15:01.has 85 pages of the 180 pages, she has 85 pages why she states where
:15:01. > :15:06.Rangers is guilty. I would advise the SPL to look at that because
:15:06. > :15:09.side contracts do come up throughout the evidence. It makes
:15:09. > :15:15.for very interesting reading. We must remember also that Rangers
:15:15. > :15:18.have been found guilty in some individual cases here. There is an
:15:18. > :15:21.element, although it is a big victory for Rangers, there is an
:15:21. > :15:27.element of tax avoidance which seems to be undisputed. The SPL
:15:27. > :15:30.will have to take advantage of that. -- take notice of that.
:15:31. > :15:35.Davidson, one of your colleagues told us today that he thought
:15:35. > :15:39.perhaps MPs should ask questions of HMRC about whether they have
:15:40. > :15:44.overreached themselves, or handled these cases badly. As we were
:15:45. > :15:48.talking earlier, it is not just this case, they lost against Harry
:15:48. > :15:53.Redknapp as well. Their strategy of going after British footballers is
:15:53. > :15:55.not going very well. Presumably they must have thought of it they
:15:55. > :16:01.were likely to win these cases otherwise they would not have
:16:01. > :16:06.pursued them. There is certainly a case for having the whole structure
:16:06. > :16:11.of these agreements looked at, and it might be that rather than the
:16:11. > :16:15.HMRC trying to pursue them under changed in order that they are not
:16:15. > :16:19.valid in the future. These sort of agreement are not in my view
:16:20. > :16:23.morally defensible, particularly in the present economic circumstances.
:16:23. > :16:29.We should not be condoning a system whereby wealthy people managed to
:16:29. > :16:33.dodge paying their fair share of taxes. HMRC's job is to PC taxes
:16:33. > :16:39.where they can, they must obviously have thought that they had a chance
:16:39. > :16:43.of winning this. -- their job is to pursue taxes. We need to look at
:16:43. > :16:47.why the tax tribunal judgment took so long. That should be pursued,
:16:47. > :16:52.because had this judgment been out a year ago, we would not be where
:16:52. > :16:56.we are now. There is also an issue to be pursued, about the question
:16:56. > :17:01.of what appears to be leakage of sensitive and confidential
:17:01. > :17:06.information from HMRC itself, which then got out and the public domain
:17:06. > :17:10.and either muddied the waters or help clarify thinks, depended --
:17:10. > :17:13.depending on your point of view. We should not have been having an
:17:13. > :17:20.ongoing running commentary from HMRC staff as seems to have been
:17:20. > :17:24.the case during the case of this. Neil Patey, the problem here is, as
:17:24. > :17:27.you were describing earlier, it depends on the particular nature of
:17:27. > :17:31.these agreements. Perhaps there was something in the agreements that
:17:31. > :17:38.the banks had which meant that they felt they had no choice but to pay
:17:38. > :17:43.up, in Rangers' case it was not. Every time you try to clamp down,
:17:43. > :17:50.there are gangs of extremely highly played -- page Loyers whose job it
:17:51. > :17:55.is to gain the system and find a way to get the same result but it
:17:55. > :17:57.is technically slightly different so you can get away with it. Yes,
:17:57. > :18:02.corporates are there to maximum returns for their shareholders and
:18:02. > :18:06.one part of that is minimising tax. They should do that within tax law
:18:06. > :18:10.and not in an illegal way. The problem with tax legislation is it
:18:10. > :18:14.is very complicated, and sometimes it is taken advantage of or used in
:18:14. > :18:22.a way which was not anticipated when the tax for education --
:18:22. > :18:28.legislation was written. So them the legislation can be tightened up.
:18:28. > :18:33.Let's finish with a football.. Rangers have had a lot of stick,
:18:33. > :18:36.Rangers. Do you think the image of the club is now dramatically
:18:36. > :18:40.different? This has changed it, it has been a cloud over the club,