Balance of Probabilities

As we wait (impatiently) for the First Tier Tribunal (Tax) to report its findings on the legality of how the EBT used by Rangers was operated, it might be of interest to discuss some common misunderstandings about the legal processes that will determine the outcome.

The case that will seal Rangers’ fate is governed by Scottish civil procedure.  Years of our lives wasted watching television has armed most of us with a basic understanding of criminal procedure- concepts like “innocent until proven guilty” are infused throughout popular culture. However, civil courts have very different rules.

Rangers FC have been accused by HMRC of operating an illegal tax avoidance scheme (see link for common myth about avoidance).  Following a long investigation, in early 2010 Rangers were sent a number of assessments (tax bills). Rangers appealed them.  In the several tribunal hearings that followed, evidence was presented by both sides and now it is for three judges to establish whether or not Rangers pursued an illegal scheme for more than a decade. I have heard lots of people (including Scottish journalists) make the mistake of assuming that “Rangers are innocent until proven guilty“. They are not. The standard for determining the outcome of a civil tribunal is the balance of probabilities. It is simply a question of whether it is more likely than not that Rangers’ were using the EBT as sham to pay money to players and executives on which they should have deducted income tax and national insurance.

In this case, it seems that the Rangers’ directors, and MIH staff in charge of running the scheme did not understand this distinction. Much of their behaviour appears to betray a sense that all they had to do was establish “reasonable doubt” to avoid getting in trouble. Currently, within Edinburgh’s golf club circuit, there is a widely held view that Rangers will be held accountable for some tax liability, but that the quantum will not be anything close to the huge assessments presented by HMRC. People close to Sir David Murray acknowledge that there was some sloppiness with regards record keeping in specific cases.  They seem to think that the resulting tax bill will be limited to these “one-off” errors- situations where there is no doubt that a contractual obligation was paid through the EBT.

However, the standard for determining the outcome of a tax tribunal is the balance of probabilities. If there is a significant volume of such transactions, the entire scheme can be judged to be a sham.

What determines whether there are enough illegal payments to cast the entire scheme as a sham? It will not require proof beyond a reasonable doubt or any of the other concepts burned deep in the minds of TV crime series viewers. There simply comes a point where there is so much evidence that it is clear that someone is “at it”. I expect that Rangers will be held by the judges to have been “at it”. If (or when) that happens, the real fireworks will begin.

Assuming that Rangers’ actions of the last decade are officially deemed illegal, Scottish football authorities will face the greatest moral dilemma in the history of our game. If I am correct, it is likely that the following facts will soon be firmly established:

• Rangers provided many players with second contracts in violation of SFA rules
• The provisions within these second contracts were in violation of the law of the land
• Rangers fielded players whom they could not have afforded without resorting to illegality

Under these conditions, the debate about ‘helicoptering’ a newco into the SPL to replace Rangers FC would surely change. The idea of transferring the last decade of Rangers’ history to a new company would be like asking for a toxic waste dump to be moved beside your house.

I have developed a genuine empathy for the many decent (but largely silent) Rangers fans whose beloved club has been ravaged by Sir David Murray and his hand-picked lickspittles.  Much of what has been revealed on this blog in the last year serves the common good of all Scottish football fans. However, I expect that whatever common ground exists will open into a chasm over the subject of what the SFA & SPL should do about the recent history of their club.

22 May 2005- is a cherished memory for all Rangers fans. Rangers beat Hibs at Easter Road to clinch the SPL title. Neil Doncaster needs to ask: “How many members of the Rangers squad that day were, or would become, beneficiaries of the EBT scheme?” (Let me help him out- it will be a lot easier to count those who did not participate). The truth is that many of the Rangers squad would not have been anywhere near Easter Road that day without the use of the EBT scheme. If the EBT scheme is deemed to be illegal, the SFA and the SPL cannot pretend that the second contracts held by the vast majority of the Rangers’ first team players during the middle of the last decade were just a procedural transgression of no material impact. On the balance of probabilities would Rangers have been crowned Scottish Premier League champions that day without the use of the EBT scheme?

The future value of winning a championship in Scottish football is in the hands of Stewart Regan and Neil Doncaster. They will face intense pressure from those close to the old regime at Ibrox- and their friends in the media- to sweep these issues under the carpet. That would be a huge mistake.