Alastair Johnston Confirms The RangersTaxCase Truth


As part of his one-on-one series of interviews with different journalists  yesterday, Alastair Johnston gave an illuminating interview to Michael Grant of The Herald. Link Here

The key text is below, but it confirms the core of what this blog has been telling you:

  • The tax tribunal began in October 2010 and ran out of time
  • It resumes shortly

However, Johnston gets one critical aspect very wrong and we will discuss this below the interview extract:

Isn’t it true that either Whyte takes over or Rangers are in terrible trouble?
Johnston: “There are other mechanisms that we would like to pursue but at this point in time, as I say, the huge contingent of what HMRC has done is actually the gorilla in the room in terms of us expediting this. The timing is not terrific.”

 You and most of the board couldn’t prevent a Whyte takeover even if you opposed it?
Johnston: “I can sit and scream but I can’t stop it happening. Rangers could face a massive bill at the end of an HMRC probe into the use of trust funds to pay players over a 10-year period.

What is the timescale for learning the final bill?
Johnston: “Unfortunately it could actually go on for a long time. They had a tribunal before Christmas and they didn’t get all their evidence. So, like they do in the law, it is terminated for four months. They are starting again at the end of this month, that will take maybe a couple more weeks, then four or six weeks to come to a decision, then they’ll issue a decision, then they’ll negotiate the decision, see what the impact of it is in real terms – money – and that could go on for months.”

Discussion:
Aside from some vindication, what I find amazing is Johnston’s comment in the last question that “then they’ll issue a decision, then they’ll negotiate the decision“.  Could it be that Rangers’ Chairman is so poorly informed and badly advised that he actually believes this?
Let me be very clear, after the tribunal returns a result, there will be no negotiation. The current tribunal is dealing with only the underpayment and interest portions of the bills. At the request of Rangers FC, the penalty determination was deferred until after the First Tier Tribunal makes a decision.  (This has the advantage of spreading out the timeline and perhaps the day of reckoning, but greatly increases the legal fees for the case).   HMRC does not negotiate underpayment of taxes or interest on that underpayment.

Any stories you might have heard about pennies on the pound deals are either urban myths or are from cases where the law is vague and HMRC can see that there is genuine ambiguity about how much should be paid.  Negotiating tax discounts creates a perverse incentive for tax payers: why pay the full amount on time when I can try to cheat and even if caught, I will pay less and later.  It is nonsense, It does not happen. It will not happen.  Least of all, HMRC will not be heading to the table for talks after having just won a protracted and expensive legal battle.

The only part which can normally be negotiated is the penalty.  HMRC will show leniency towards tax delinquents who wandered accidentally across the line and who are ready to make good on their underpayment and interest.  The highest penalties (75-100% of the core underpayment) are reserved for those who can be proven to have consciously broken the law and who have attempted to deceive HMRC.  Rangers are already in possession of a penalty assessment that is 75% of their £24m core underpayment.

So is Johnston ‘playing dumb’ and trying to make this process sound less threatening, or does he really not understand the what is happening?  Is it really possible that Rangers’ directors have been sleep-walking their way to disaster?  Could Craig Whyte also not have understood how high the stakes were until recently?  Popular culture likes to imagine that “the smartest guys in the room” are making deals and cleverly assessing their every move.  However, I am open to the possibility that there has been monumental ignorance and incompetence on Rangers’ board and their false confidence could have rubbed off on anyone dealing with them.

Another point to address from a different interview, Alastair Johnston repeated his strange assertion that “no one is accusing Rangers of having done anything illegal”.  Yes they are.  Rangers are accused of having broken UK law.  It will take quite a creative definition of “illegal” to say that consciously breaking the law is not “illegal” conduct.  What no one has done is to file criminal charges.  That was at HMRC’s discretion.  HMRC is a revenue collection organisation and usually only brings criminal prosecutions in cases involving lawyers and financial professionals where it is easier to prove that they would have known that they were committing a crime.  The standards of proof in a civil tax tribunal are also a lot lower than in a criminal court.  So, it is extremely unlikely that anyone will be criminally prosecuted in Rangers’ case (unless they commit perjury), but that does not mean that Rangers have not acted illegally. They have.

Whether it is ignorance of  the legal process or an attempt to deceive, Alastair Johnston’s shambollic performance yesterday should send a shudder down the spine of Rangers supporters.  In times of trouble, it is often to the Chairman to whom companies turn for experience, wisdom, and a steady hand on the rudder.  Rangers may be lacking someone to play this role.

About rangerstaxcase
I have information on Rangers' tax case, and I will use this blog to provide the details of what Rangers FC have done, why it was illegal, and what the implications are for one of the largest football clubs in Britain.

44 Responses to Alastair Johnston Confirms The RangersTaxCase Truth

  1. timmyconspiracy says:

    Ah, it just gets better and better. Keep up the good work!

  2. Ricardinho says:

    It seems Graham Spiers also believe that if they lose the case they can potentially head to the table to negotiate. I don’t know has informed both but like you say it would set a precedent where every one would try their hand at it. If you don’t get caught you get away scot free. If you are caught you only have to pay a percentage of it.

    Doesn’t seem to make any sense.

  3. me 2 says:

    another illuminating piece, the truth is slowly coming out, what we need are more journalists to ask hard questions – where are you Mr Spiers.

    I find it hard to believe that Whyte didn’t know about this 2M tax bill and as far as I can see the scene is already being set to make this the reason he will walk away from the deal.

    The huns have been wasting a lot of bandwidth convincing themselves everything will turn out OK, and hoping that Whyte or some other captain of Industry would take a gamble at short odds with a huge stake of their own personal cash, will they similarly take a gamble and buy up all the season tickets for 11-12 season knowing there is a real possibility of administration and bankruptcy?

    Or will they stick their hypocritic heads back in the sand

    Time to sack up Huns

  4. Steinreignedsupreme says:

    I’ve been extremely interested in the stuff you have posted on here this week. You have simplified a lot of the stuff and I have to congratulate you on your work.

    Forgive me for my ignorance though when I ask you that if Rangers opt for administration will they avoid having to pay HMRC – and simply face a points deduction?

    Sorry if you have already answered this point, but I didn’t spot it.

  5. I will be doing a full article of what could/would happen. Sorry to make you wait on the answer. Short answer: It depends. 🙂

  6. Steinreignedsupreme says:

    No problem. I look forward to hearing the possibilities…

  7. Stevenw1260 says:

    If find it incredible that the Chairman of a PLC company can perform so badly & be so niave about the company’s biggest risk, on a day that needed a steady hand. Does not bode well for the future !!

  8. gorillainaroom says:

    I await your next word with baited breath!

    Enjoying the intelligent discussion. This is like celticw***news with charisma!

    I realise you have to filter out a lot of content. Could you please consider blogging “rangers tax case for dummies” with all the binned material? It seems such a waste and would be a comedy hit!

    I have to say the change in the rags editorial view in the last few days has been unbelieveable. Winds of change indeed. Kudos to you!

    Scorpions csc

  9. It’s not a terribly large plc, but it is very prominent. He does have a strong reputation in the entertainment industry, and sits on the board of IMG. So he will know how a Chairman is supposed to act. I think that he did not get much sleep during his trip and was tired and simply frustrated dealing with the discovery of landmines left by Murray. Regardless, if I was a Rangers fan, I would be embarrassed and concerned.

  10. Auldheid says:

    The exchange between Chic Young and James Traynor on RS after 2pm was comedy gold. You can upload after waiting until the countdown ends at

    http://www.megaupload.com/?d=X36ML4ZI

  11. Many thanks for the kind words and encouragement- and to everyone who has written words of support- I can’t acknowledge each one.
    I am still trying to absorb how popular this page has become. I had imagined my geekish obsession with this subject was a character flaw and did not realise that so many share this defect! 🙂

  12. Auldheid says:

    It is is arrogance borne of experience. It permeates all that they do.

    When you are used to bending the law or having the law bent in your favour, the possibility that the law might actually be applied properly never occurs to you, so you never plan properly to deal with the consequences of that happening.

  13. ramsay smith says:

    Perhaps they could sit down witha nice bottle of wine from Oddbins to discuss the matter in a civilised manner.

    Oh no, wait a minute.

  14. A nice summary of the psychological flaws that lead to this. I understand that RFC have dabbled in every manner of tax scheme- fair and foul.

  15. gorillainaroom says:

    Well to be ferr you are a bit geekish and have character flaws but not in the same way as say peter tobin!

    The site is popular because it is telling like it is full stop. It wouldn’t be popular except in the backwater that is scotland where journalism is a joke.

    And yer patter is no bad either!

    And as huey lewis and the news would oft say “it’s hip to be square”

  16. Timcognito says:

    Excellent blog fella, events are backing you up very nicely!
    Couple of questions, the outstanding tax is perhaps easier to calculate, the amounts paid into the trust are in the Rangers accounts. But how is the interest rate calculated? Are there standard rates applied? Obviously the difference of the compound effects of 2% or 5% are quite marked.
    Also, if HMRC were in the position that rangers could pay the tax and interest, perhaps over a very extended period, and a penalty clause resulted in administration, surely it wouldn’t be in their interests to apply it?

    As for HMRC collection strategy, that will remain to be seen. However, a scalp as big as Rangers could send a warning that brings in much more money that sending the signal that if you plead poverty, you can “get away with it”.

  17. Interest is calculated at 4% and if you compound it (i.e. pay interest on the interest- so if you start owing 100, you will owe 104 at the end of the first year, 108.16 at the end of the second.
    You have to take the breakdown of payments provided in the earlier article. It comes to just over £10m. If you compound quarterly or monthly, it can rise to about £12.

  18. Sir Dirty Money says:

    Dundee Utd 3 Rangers 2. This just gets better and better. The future is indeed tantrums.

  19. Sir Dirty Money says:

    Tangerine. Bloody auto complete:@

  20. Boab says:

    I think a lot of people are confusing HMRC with the old Inland Revenue, where they would be much more likely to sit round a table, all chaps together and discuss things. Customs & Excise would be much more likely to just issue an assessment with penalties, review it themselves if the taxpayer asked for that, then go to tribunal. They were more “hawkish” and that seems to have been brought to the new Department, created when the IR and HMCE merged. The enforcement and investigation sides of the new Department are much more along the lines of HMCE.

  21. Kip Kane says:

    There is a lot more you are not telling us but i’m sure you will given time.What i can’t seem to understand is a director of a football club speaking to the media as if there is nothing wrong.I suspect that the shit is really going to hit the fan when the fakeover doesn’t materialise.Everybody and their granny knows that something is rotten here but here we have Mr Johnson trying to say everything is ok. What happens to Mr Murray when he conveniently sneaks out the back door.He caused this.Surely he can’t get away with it.

  22. Kip Kane says:

    Is there no help for the widow’s son?

  23. me 2 says:

    I think you were spot on the first time lol

  24. gorillainaroom says:

    It’s all about the pricetags, don’t worry bout the bawbags.

  25. me 2 says:

    and bearing in mind the current financial climate, the only negotiation possible (appealable?) will be on the penalties the tax and interest will be a bill due.

  26. me 2 says:

    Which bank will be doing business with Rangers IF Whyte buys the club and pays off the TSB?

  27. A bit like asking which Martian will we deal with in the event that they invade us. 😉

    The best thing for Celtic fans now would be for Whyte or someone to buy them now. It would remove a lot of cash from the table for when Rangers really need it.

  28. Ardee says:

    Since they have acknowledged culpability in the options case, does this create a precedent in the discussion as to who is responsible for the repayment and fines?
    This should put to bed any thoughts that SDM or MIH would pick up the tab.

  29. Paulsatim says:

    there is another question that needs answered, where is Me? He/she been very quiet recently!

  30. FYI. They have not admitted anything.

  31. Paulsatim says:

    At what point in the process will the UEFA licence come into question?

  32. Michael says:

    I’ve not seen anything about Rangers’ wee shareholders. I’d be pretty pissed off if my celtic shares were being “sold” under my feet with no input.

    There are takeover rules that haven’t been discussed. It is time that the ordinary shareholders learn what is going on. Alistair Johnstone has a duty to all shareholders. He really needs to make sure he knows who he has to protect.

  33. oldagefanclub says:

    Administration is not something you opt for. Administration is forced when your liabilities are greater than your assets, which is not the case yet! If the tax tribunal rules that Rangers are liable for payment, then administration may be forced upon them. It may be the only way to recover, but don’t be in any way fooled that administration is the easy option.

  34. another minty landmine says:

    Great post. I was given some information on Thursday that made me question the veracity of your claims but I should have trusted my instinct. You’ve proven to be consistently correct and are surely now a must read in the Scottish media judging by the rapid upturn in the quality and depth of media reporting of the issue.

    No wonder Traynor, Keevins et al rail against blogs. Not only do they divert eyeballs away from their ‘news’ papers, but they can see the quality, depth of knowledge and lack of spin are a very real threat to their positions and livelihoods.

    Quick question: whyte obviously conducting due diligence in his attempt to buy RFC. Do you think he expected good faith given in negotiations given that it is not a hostile take over? Could this additional unexpected HMRC amount make him walk away? I can’t help but think that Whyte must feel he is dealing with a nest of vipers that cannot be trusted and maybe will want to go through everything again.

    Quick question:

  35. Ian Ferguson says:

    Unfortunately they don’t count.. I know this from experience.
    I had shares in a company ,
    They were an engireering company, doing well, so I took a punt on them.

    Tories got in, they started supporting MrsThatcher.
    I sold the shares

    Later I received a letter,
    They were amalgamating with another company, and their appointed agent contacted me because I had a residual share holding,
    I had sold in round numbers but had a “30 Bob” holding left.

    I ignored the letter,

    I later recieved a notice that my residue of shares had been placed under a court order and I could contact them for a redemption price for the residual shares.

    So in short … YOU are FKD if you disagree.

    Sell now while they have a value or put them on your mantlepiece.

  36. Ardee says:

    Indeed, but Rangers have set aside a provision to cover the bill.
    Ironic that the establishment team habitually flaunted the tax rules.

  37. John says:

    How on earth could Rangers get involved with this lawyer Baxendale-walker? An individual who has had a chequered past to the say least. Been involved in a case of defrauding a Scottish Company’s pension fund: is struck off from the English Law Soiciety for his actions : is the owner of a film production company in the porn industry and has been an individual that has been investigated by the Serious Fraud Office that resulted in a criminal case against him !!!

    Check out the Law Society’s tribunal findings on him when he was struck of it makes interesting reading.

    The man has strange views, gone to the red zone website where you can see Mr Baxendale performing. He had a chat show on an obscure sky channel.

    The firm has an office in London and Glasgow.

    With Mr Baxendale-Walker’s past you do question Rangers getting involved in ant tax scheme devised and sold by him.

  38. instant karma says:

    naw

  39. Boab says:

    His due diligence must not have been up to much if it didn’t pick up a £2.8m tax bill waiting in the wings. That’s kind of the point of doing it. So if that came as a surprise to him on Friday then I would venture the level of his due diligence is being over-stated.

    The other thing which confuses me a bit is that his “partner” Mr Ellis also did his due diligence last year. That seemed to drag on for an age as well. One would have thought the process would have hit the ground running this time. Unless of course Mr Whyte chose to start from scratch. Which speaks volumes for what he thinks of Mr Ellis and his team.

  40. Boab says:

    Mr Baxendale-Walker seems like an interesting person. Has it been confirmed that it was him who put Rangers onto the EBT schemes. Did he act as their advisor in relation to this matter, it does seem like his area of expertise.

  41. Boab says:

    Added

    It seems that Andrew Thornhill QC, who is acting for Rangers in this matter was co-author of a book on the subject on the law as it relates to trusts.

  42. Yet another reader steals my thunder! I am planning a Paul Baxendale-Walker article and will elaborate on the themes you have introduced.

  43. Boab says:

    LOL, I think that can be taken as a Yes.

  44. John says:

    I have had dealings with the man and a number of his products are under HMRC investigation. The Private Annuity Trust PAT is a similar structure to the EB T and the individual access his cash by way of loans that a structured never to be settled until death and at that time written off!

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