20/11/2012 Newsnight Scotland

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,