20/11/2012 Newsnight Scotland


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on a broader peace package in the next 48 hours, it could become an


inevitability. Tonight on Newsnight Scotland:


Did Rangers football club go to the wall for nothing? Today they won


the big tax case that has been hanging over them for three years.


So does HMRC have questions to answer over the conduct of the case,


and what are the implications for the club?


Good evening. To say this is a long-awaited result is a bit of an


understatement. The potential liability of up to �94 million has


undoubtedly been a factor in Rangers' difficulties. But today's


victory may seem rather hollow to the now third division club. So how


Rangers are at the top of the Third Division. A brand new company which


is still be custodian of this sporting legacy of one of Europe's


greatest football teams. But not its financial liabilities. Old


Rangers were a team that reached for the sky, at home and abroad.


What a goal! Now in liquidation, but it looks as if the old team may


have won a final victory over the taxman and the use of employee


benefit trust so. Employee benefit trust are widespread. When there


were first introduced it was HMRC it authorised -- HMRC authorised.


The idea was assets would be put into a trust and then were


distributed among the whole workforce in a tax-efficient manner.


For nearly 10 years, the odd club used trusts to make payments of


millions of pounds to players and staff, up but HMRC argued this


amounted to tax avoidance and wanted tax and national insurance


to be paid. At one point it was estimated that Rangers could owe it


�94 million if they lost the beak tax case. But old Rangers 1. The


tax adviser he was partly responsible for bringing the Skene


to Rangers may well be feeling vindicated tonight. It is only a


problem if HMRC win. If they don't win, hopefully they will come back


and say it all the Rangers fans want to thank you because you


single-handedly saved Rangers FC �50 million. You Ara hero.


years, the owner of Rangers have been trying to sell it, but with


the possibility of such a huge bill hanging over the club, no-one was


interested. He ended up selling it for just �1. The old Rangers were


forced into liquidation by HMRC after a -- over a smaller tax bill.


Meanwhile, HMRC are considering an Today's decision and any appeal


went affect the Rangers team that is now playing. It is a new and


separate company. But there are two big questions. One, did HMRC's case


against Rangers fail? Secondly, did a great teenage lead disappear for


nothing? I'm joined now by Neil Patey,


partner at accounting firm Ernst & Young. Were you surprised by the


decision? The not totally. Complicated tax legislation, there


are lots of issues involved and it wasn't a clear cut decision.


Correct me if I am wrong, but it revolves around a very narrow and


point. It was deemed that these trusts, the beneficiaries of them


did not have full control over them and therefore they counted as loans.


Exactly. Were they learns or were they remuneration? -- loans.


the tribunal come to any conclusion on any of the things that were


claimed during the hearings, in that the money did not have to be


paid back? There was talk about it would not be paid back until such


time as a player had died and then the loan could be set against


inheritance tax. Some of the trusts were ten-year loans and they're all


different to the individual circumstance. And it appeared some


of them didn't pay it any interest. Everything was different and that


is why it took so long to go through all the details. If they


are loans, as they have concluded, is there a suggestion they might


have to be paid back? Ultimately, yes. They will be repayable in the


player's lifetime come on or on their death. But the trust was set


up typically for the benefit of the player's family. So in other words,


it does not mean that the creditors of Rangers get any money back?


Absolutely not. This is money was put into trust by old Rangers.


the trustees are in some cases as a pin you are suggesting that the


players themselves, or their families, and let's say a player


dies and the loan is paid back and is paid to the trust, not to


Rangers' Paul Murray Holdings, isn't the money effectively been


paid by people to themselves? trustees will be the beneficiaries


and will have the power to decide to what is done with the money.


issue here - it must be a blow for HMRC? It is right that they should


pursue unpaid tax when they think it is due. A but this was quite a


strategy. They decided British football was a law unto itself.


There was the court case involving Harry Redknapp. They lost that.


They have now lost this one. What is the strategy go from here? --


where does the strategy go from here? This is probably a setback,


but every case will be different. The detail is important, even


within the sub trusts themselves. You can't necessarily say they


would lose any other cases with Surely there will be tax lawyers


saying, icy, if we do it this way, that is all right? With any tax


legislation, people always look at tax planning within the law. If the


Revenue stop a loophole -- spot a loophole, then legislation can be


changed to close it down. Do you think that is more or less likely


as a result of this? It is like the judicial route is not working.


situation like this, I imagine HMRC will look at their findings and if


they think it was used in a certain way it was not meant to be, they


can change legislation to make it clear how we should be used. Do not


go away, let's bring in Tom English, chief sports writer at the Scotland


on Sunday and Ian Davidson, glass slope -- Glasgow's MP. There will


be a lot of Rangers fans watching this thinking, hang on a minute, OK,


maybe technically the reason the club went bust did not have


anything to do with it, but if this had not been hanging over Rangers,


David Murray would never had sold the club for a pound to Craig White


and all that happened would not have happened. And the club would


not be in the Third Division with little hope of getting back to the


top for several years. Yes, and they would have a fair point if


they thought that. The only reason the club was sold for a pound was


because they had this big tax case, the Sword of Damocles, hanging over


Ibrox. No responsible owner would get involved in Rangers when there


is a potential �70 million bill. Possibly due to be paid. It allowed


Craig White in the door, we all know what happened after that.


Rangers fans will say, if this was ago, we would never have heard of


Craig White, the club would either be in David Murray's hands or a


responsible and I would have come in and there would have been none


of this. Do you agree with that? To some extent, supporters of Rangers


could feel they have a raw deal. Yes, in particular the fact that


the tax tribunal evidence was all completed by 11th May. I understand


that the club expected the judgment in 20th November 11. That then


judged on. If that huge tax case had been removed from the situation,


clearly some other buyer might well have come in to publish -- purchase


the club and we would not be where we are. Not withstanding, we need


to look at the big picture. The big picture really is that while


Rangers up -- Rangers' tax avoidance schemes have been found


to be legal, they are not morally justifiable in any way. I do not


think anyone can defend richly paid footballers avoiding tax in the way


that they have while the supporters that pay their wages struggle to


five -- survive economically difficult times. Hang on, the


problem... I think that tax avoiders was not part of the


tradition of Rangers. I three -- if we had fans on the board, this


would not have happened. problem with the last point to make,


the results of this case will rather encourage others to do the


same. For example, there are at least 22 banks and investment


trusts in the City of London who through their hands up and said, we


will just pay the money. They did not fight it. But now, as we were


talking about earlier, there will be tax lawyers up and down the


country trying to devise strategies to achieve precisely what you say


you do not want. Absolutely, and that is where this case goes far


wider than Rangers, it ties into Amazon and Starbucks and the rest


of it. People who have lots of money and want to avoid taxes,


managed to get highly-paid accountants and Lewis to find ways


around the system, -- glorious to find ways around the system, and it


is not for their point The question is of transparency. It is about


having all the paperwork available to the fans. I do not think if had


happened to Rangers had fans been there from the beginning. This has


been a rich businessman's scan, it has not been defensible in any way.


To some extent, David Murray dug a hole that the club has fallen into.


Nothing in the judgment, Rangers fans may feel aggrieved, but


nothing in the judgment held the club in its current predicament of


being in Division Three. No, this is all an Old Court issue. The only


thing that could transfer to the new courts is the ongoing


investigation into contract by the SPL, and this decision could its


impact the SPL contracts are decided. The tribunal did not come


down on one side or another on this very specific issue on whether


these so called side agreements the players had should have been


reported to the Scottish football authorities? No, that was not a


matter for this tribunal. That is a separate investigation for the SPL.


What do you think will have pulled -- happen with that? Is the SPL


case undermined? You could say yes because of the out come here, but


the dissenting voice in that three- person tribunal is one woman who


has 85 pages of the 180 pages, she has 85 pages why she states where


Rangers is guilty. I would advise the SPL to look at that because


side contracts do come up throughout the evidence. It makes


for very interesting reading. We must remember also that Rangers


have been found guilty in some individual cases here. There is an


element, although it is a big victory for Rangers, there is an


element of tax avoidance which seems to be undisputed. The SPL


will have to take advantage of that. -- take notice of that.


Davidson, one of your colleagues told us today that he thought


perhaps MPs should ask questions of HMRC about whether they have


overreached themselves, or handled these cases badly. As we were


talking earlier, it is not just this case, they lost against Harry


Redknapp as well. Their strategy of going after British footballers is


not going very well. Presumably they must have thought of it they


were likely to win these cases otherwise they would not have


pursued them. There is certainly a case for having the whole structure


of these agreements looked at, and it might be that rather than the


HMRC trying to pursue them under changed in order that they are not


valid in the future. These sort of agreement are not in my view


morally defensible, particularly in the present economic circumstances.


We should not be condoning a system whereby wealthy people managed to


dodge paying their fair share of taxes. HMRC's job is to PC taxes


where they can, they must obviously have thought that they had a chance


of winning this. -- their job is to pursue taxes. We need to look at


why the tax tribunal judgment took so long. That should be pursued,


because had this judgment been out a year ago, we would not be where


we are now. There is also an issue to be pursued, about the question


of what appears to be leakage of sensitive and confidential


information from HMRC itself, which then got out and the public domain


and either muddied the waters or help clarify thinks, depended --


depending on your point of view. We should not have been having an


ongoing running commentary from HMRC staff as seems to have been


the case during the case of this. Neil Patey, the problem here is, as


you were describing earlier, it depends on the particular nature of


these agreements. Perhaps there was something in the agreements that


the banks had which meant that they felt they had no choice but to pay


up, in Rangers' case it was not. Every time you try to clamp down,


there are gangs of extremely highly played -- page Loyers whose job it


is to gain the system and find a way to get the same result but it


is technically slightly different so you can get away with it. Yes,


corporates are there to maximum returns for their shareholders and


one part of that is minimising tax. They should do that within tax law


and not in an illegal way. The problem with tax legislation is it


is very complicated, and sometimes it is taken advantage of or used in


a way which was not anticipated when the tax for education --


legislation was written. So them the legislation can be tightened up.


Let's finish with a football.. Rangers have had a lot of stick,


Rangers. Do you think the image of the club is now dramatically


different? This has changed it, it has been a cloud over the club,


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