Herald: Whyte told to take on tax bill risk


The Herald is reporting that Craig Whyte has been told that the tax bill will have to be at his risk if he is to buy Rangers.  MIH’s newly released accounts do not include a provision for accepting liability for the tax case either. The MIH accounts firmly drive a nail into the coffin of the idea that the parent company would for some insane, illogical reason, volunteer to pick up Rangers’ tab.

http://bit.ly/gJi0Tu

I know, I know.  It has been printed in a Scottish newspaper, so we should not take it too seriously.  However, it might just be that after the disorganised shambles of yesterday’s financial presentation, that the Scottish media senses that the winds are about to change regarding Rangers.  While Scottish demographics dictate that editors tread lightly lest they be seen by their customers to have actually caused the deal to collapse, Johnston’s admissions yesterday now clear a path for a bit of honesty to creep into stories.  The Daily Record’s circulation amongst Celtic supporters never recovered from the infamous “Thugs and Thieves” headline.  This tale is often recited by news editors.  No one wants to lose a large number of Rangers fans at a time when newspapers are struggling to survive.

However, it is encouraging to see a glimmer of sanity emerge from its long hibernation.  With Glenn Gibbons also taking a swing at the architect of Rangers’ current situation, Sir David Murray, it looks like spring might finally be here.

For Rangers fans, recent events will all be a shock and difficult to absorb.  I can say in all sincerity that the best thing for your club, and for Scottish football, is that Rangers FC is driven into administration by the fastest legal path.  It is a high risk strategy, and one which does not have a certain outcome.  However, the longer this cancer is left to grow before surgery, the lower the chances that your team will survive its removal.  Forget the gloating of your Celtic supporting workmates and worry more about having a football team for your son to support.

I will cover a range of scenarios for how administration would work and how this situation could resolve itself in a separate post soon.  However, those who say that liquidation could never happen, do not understand the situation.  The earlier this problem is pushed to a resolution the better for all concerned.

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.

33 Responses to Herald: Whyte told to take on tax bill risk

  1. Paranoid Timdroid says:

    Administration might be a good idea, but liquidation will never happen. Absolutely no private sector company in their right mind would consider buying the clubs biggest asset with a view to changing it’s purpose. Ibrox will always be a football stadium for the simple reason that anyone who tried to change that would find every office and premises in Scotland under siege, not to mention the reaction, protests and inevitable vandalism that would ruin any development on the site itself. Best case scenario should Rangers lose the tax case is 1 season in Administration and the creditors accepting a very small percentage of the debt owed, worst case would be several seasons of no investment in the squad, wage levels comparable with Dundee Utd, and the sale of Murray Park while the debt is paid down on exceptionally difficult terms. I still expect a takeover to go through and for them to come out stronger mind you. That’s just what they seem to f***ing do.

  2. In the post I will write on this, I think you will see that there are numerous twists in the Rangers’ tale that make administration far from straightforward. It could also work out to be the best thing that ever happened to them. Lots of variables. Look forward to discussing it with you.

  3. mcguireonfire says:

    Do you have any info on this Dextra case and if Rangers could successfully cite it as precedent?

    Also, why no provision in the accounts for the tax liability. Is it simply the case that putting a provision in there would make the accounts look much, much worse?

  4. Andy fitzpatrick says:

    Who do you think Is in denial the most, the rangers fans or murrays media muppets.
    Looks like THEY have been bitten by the hand that fed them as it looks as if Murray has told them a few fibs to help him get shot of the poison chalice.
    As a Celtic fan I’m looking forward to the games between Celtic and rangers united. Tehe

  5. KajunFirefly says:

    Should administration happen, the most likely scenario is that Ibrox Stadium and Murray Park would be sold and then rented back to Rangers FC (and probably renamed).

    The administrators would look at these realisable assets as the quickest way for the creditors to receive a worthwhile dividend on the debt they are owed. Although that’s assuming either property has a positive equity value.

  6. Andy fitzpatrick says:

    I would like an investigation into how rangers got permition to build Murray park as it was a green belt and house builders got told no chance before rangers got the green light.
    Also I would like to know why A good few years ago BBC Scotland had a rangers European cup game televised from ibrox,the porblem is that they were playing away from home,why pay rangers when the BBC have there own studio all set up.
    As I pay a licence fee I would like to know.

  7. Mort says:

    Posted this on CQN yesterday regarding what might happen should Rangers go out of business. I know you don’t think they will and that administration is most likely but this is my take on another possible option for them.

    In recent history two Scottish football clubs have gone out of business. Airdrieonians folded at the end of 2001/02 after playing in SFL 1 and being runners-up to Partick. When they folded a number of businessmen in Airdrie set up a club called Airdrie United and applied for the vacant position in the league. This application was denied and instead Gretna was awarded the place.

    Gretna joined the third division and made rapid progress to the SPL. More on them later.

    The owners of Airdrie United then purchased Clydebank who were at that time in the second division. This in effect gave Airdrie direct access to Division 2 instead of Division 3.

    Gretna became the second team to go out of business following their one and only season in the SPL at the end of 2007/08. Their place in the league was taken by Annan Athletic who joined Division 3.

    The reason I have provided this background is to consider what might happen should Rangers become the next team to go out of business.

    There appears to be two options.

    i) A new club could rise from the ashes and apply for entry to the SPL/SFL. The question would need to be asked if the rules around the SPL and SFL are different and could a new entity join the SPL straight away. This could have knock-on effects for other clubs, those relegated, just missed out on promotion etc. If not, the new entity if successful in application could join Division 3.

    ii) Someone could purchase another team in SPL/SFL and relocate the club to Ibrox and join whichever league that club plays in.

    The other question would be, what would happen all the existing assets should they go out of business. Presumably the bank would own the ground, the players etc and would be under no obligation to sell either to the new entity or to the owners of another club.

    Interesting times ahead.

    Mort

  8. THM says:

    In the reports this morning, the tax case that Rangers are looking too for salvation is Macdonald (HMIT) v Dextra Accessories Ltd (http://www.hmrc.gov.uk/practitioners/macdonald-v-dextra.htm).
    The opening line of the HMRC take on it is
    “In a unanimous verdict, the House of Lords have upheld the decision of the Court of Appeal in favour of the Inland Revenue in the case of Macdonald (HMIT) v Dextra Accessories Ltd & Others.”.
    The case looks to be set out on whether these payments can be classed as emoluments. Ignoring the opening line, is there any way that they can find any comfort from the House of Lords Ruling?

  9. Expat_Tim says:

    Could you fill us in on the impact of the Dextra case cited at the end of The Herald article? What exatly are Rangers going to argue using this HoL case?

    Thanks

    PS

    The blog is fantastic. A sole voice of reason in a world of untruths and insanity!

  10. Gary says:

    Your link clearly states,

    The latest accounts of Murray International, meanwhile, reveal no provision for any potential liability.

    In the accounts, seen by The Herald, Murray International states: “On the basis of expert tax advice, the group continues to defend a tax query raised by HMRC into the operation of an employee benefit trust.

    This is scheduled for resolution by a tax tribunal in 2011.

    “The directors, having considered professional advice, are of the view that it is reasonable not to provide for amounts in respect of this matter.”

    They haven’t put aside anything because as they state the group continues to defend a tax query by HMRC. Putting money aside while contesting the case would be an admission of defeat.

    Try harder taxcase

  11. Louise says:

    Really enjoying your blog. I have been following your facebook page for sometime and began to be sceptical about what you were saying when I read that a takeover was imminent, although I was sceptical about that too. However, the relevations yesterday back up everything you have been saying for months. I was wondering if you know anything about the situation involving the company quoted in the Herald article – Dextra? Are the directors of RFC clinging to hope or does the circumstances of the Dextra case give them cause for optimism or is this optimism mis-placed clutching at straws? As a Celtic fan I do worry about the state of Scottish Football but I also feel that if HMRC are successful in their case against Rangers ourselves and Aberdeen were cheated in the nineties out of several trophies and, therefore, my sympathy for the predicament RFC would find themselves in is limited.

  12. Boab says:

    Why would there be “inevitable vandalism”, Paranoid Timdroid. Are you suggesting that the Rangers supporters would carry out this violence. I think that’s a bit unfair. As indeed is your suggestion that every office and premises in Scotland would be under siege.

  13. Auldheid says:

    If Rangers are to go this road, which I think is the honest way out, I predict it will become Scottish Football’s problem and not just Rangers.

    Arguments that may stand up (like loss of income to our game) will be put forward for saving them and if public money is to be used at all, a prime condition will have to be that the sectarianism at the core of the club is removed.
    That will be difficult I know but there is a strong case that it is sectarianism and their inability to see Celtic, and what they think Celtic represents, as equals that has been behind their downfall (for every fiver etc). Life teaches better than words can. (It is the Acceptance stage of experiencing loss)

    I reckon it will also impact on Celtic because an obvious solution would be a different distribution of CL money. The winners would get a higher share obviously, but would not take all. Sharing the rest amongst the other clubs might make the need for a 10 team SPL less necessary if every club knew they were to get a guaranteed say £750K a season so alternatives that were discarded may become viable.

    Whilst this would reduce income Celtic would have to spend on players, they do not budget on CL money anyway and with FFP coming in and banks no longer prepared to make players rich at everyone elses expense, the reduce income may not be reflected on the park in terms of loss of quality. It is also my observation that the teams who end second and third in the CL sections and the others who are in the Europa are not of the high standard of the CL semi finalists, so we would be competitive against most in Europe.

    Crisis is supposed to offer opportunity, interesting times indeed.

  14. Cautious Dave says:

    If I were a creditor of Rangers or any other business for that matter, I would not be willing to accept a pence in the pound deal when the business had assets that could be liquidated to settle the debt.

  15. Scottish journalism at its finest!

    The Dextra case was, at its core, very different to Rangers’ situation. However, of relevanmce to the case it established that:

    – EBTs could be operated legally (which this blog has already told you is the case)

    – that “emoluments” (i.e. contractual obligations) cannot be processed through an EBT

    Dextra was primarily about the dedictability of payments to EBTs from corporation tax. That lays no part in the Rangers case as Rangers have amassed such high losses over the years that they will never pay corporation tax in my lifetime. (Although I need to check the ‘change of control’ provisions for carrying over tax losses).

  16. Auldheid says:

    The post at 12:45 on page 4 of CQN at http://celticquicknews.co.uk/?p=5028&cpage=4#comments gives a view on the Dextra case.

  17. SeltikBhoy67 says:

    I notice there is a couple of comment’s mentioning the sale of Murray Park, I always thought that Murray Park belonged to Sir David Murray and he leased it out to Rangers, is this the situation,or is it owned by Rangers ?

    SeltikBhoy67. Hail Hail

  18. Boab says:

    The creditors vote on whether they will accept an offer from the administrator as far as I am aware. The majority decision rules for everyone. If the vast bulk of the debt is to HMRC then, as I understand it, they will decide whether to accept or reject any offer. They will effectively be the only vote that matters.

    That’s just my understanding of the situation. I will happily concede that it may be wrong.

  19. Boab says:

    I think the argument that Scottish football needs a strong Rangers, or indeed Celtic, is specious. We have had a period where Celtic won nine titles in a row, dominating Scottish football. We have had a period where Rangers won nine titles in a row, dominating Scottish football. That’s almost two decades, in living memory, where one team was very much stronger and more dominant than the other. Scottish football survived, the weaker club survived, they came back to challenge and win again.

    A weakened Rangers may well lead to a reduction in the money available to Scottish football, primarily through TV revenue, however I am not entirely convinced that would be the catastrophe that some people make it out to be. It may make things less of a 2 horse race, would that be so terrible. Was it really that bad when Aberdeen were competing and winning. It may actually be OK to have some competition outside of the “big two”.

    In essence, it might be OK to go back to the time before Sir David Murray made football in Scotland all about spending money to win things. Money they didn’t have as it turned out.

  20. No it is definitely 100% owned by Rangers FC.

  21. And they vote based on the percentage of the liabilities they hold. HMRC will have majority creditor status and can block any deal on their own. Lloyds have security interests and priority. Unless they can agree a division (which I think will be difficult), liquidation would be the only other option. It is far from certain, but those who say that liquidation is not a possibility, have not thought this through.

  22. Ian Ferguson says:

    I found your comment that they had made no provision because they are continuing to argue their case strange.

    Rangers made an offer to settle which was rejected so they must feel they owe at least that amount.

    I think taxcase has hit the nail on the head.

    Rangers are making no provision because they can’t. If they put the potential liability into print it would emphisise their precarious position, and the fact that they CAN’T pay.

    I read on Phil Mac a while ago that companies usually put all their eggs into the one basket so to speak, get the position clarified, appeals etc. through to a conclusion. It is the cheapest way to handle things as it cuts down on all the legal bills.

    Rangers are going in the opposite direction, seperating things out paying extra, but muddying the waters.

    The only reason I can conclude for doing this is to make sure they get this years Euro licence.

  23. ramsay smith says:

    If Rangers are wound up how much will the tangible fixed assets sell for?

    The ones valued in the balance sheet at £120m

  24. Ibrox is worth almost nothing except to a large football club. However, even if Rangers relaunched from administration, the club (or a new one representing their current fans) could rent Hampden. The grade-2 listed building status could eventually be overcome (it is a Victorian redbrick building, not the Colloseum), the land could be redeveloped. However, there are other plots available in that area. My guess is that it would not raise more than a couple million in a liquidation.

    I hear different stories on whether Murray Park can be redeveloped or not. So you will have to make your own guess there.

  25. SeltikBhoy67 says:

    RangersTaxCase,

    So is it the Albion car park I’m getting mixed up with, is that a Murray asset or Rangers ? Is that of much value the car park ?

    I was just listening to Daryl King discussing all this Rangers takeover/tax business on radio there, and it sounded as if he was repeating all these point’s you have mentioned in your article above, I wonder if he read’s the blog. ??

    SeltikBhoy67. Hail Hail

  26. The Albion was separated out for some reason and is part of another Murray company. Not sure if it is within MIH or another Murray vehicle, but it is not owned by Rangers.
    Other myths to bust: Rangers Youth Development Ltd, which owns the contracts on the Murray Park players, is 100% owned by Rangers FC. Murray’s PR bluffs to lure investors failed and there is no record of there ever being any external investors in this business. Murray makes stuff up to make himself look like a genius shocker?

  27. Paranoid Timdroid says:

    Boab, in relation to my original point, i honestly believe that if a private sector company bought Ibrox on the basis that they were going to tear down what they could and use the ground for something else, that said company would be on the receiving end of some very nasty treatment from the more extreme end of the Rangers support, and would probably get a lot of hassle(whether direct or indirect) from the majority.

  28. Boab says:

    If I remember correctly HMRC did not want to accept the Dundee deal, however they were outvoted.

  29. The critical item in these matters (as I think you understand) is ‘does HMRC own enough of the liabilities to veto an agreement’. In Rangers’ case, they will.

  30. Boab says:

    I think the car park was put there as part of the conditions for them putting the extra seating in. Therefore it has to stay as a car park. That may even mean they can’t sell it, as it would then not be satisfying that part of their permission to put the club deck (I think) in.

    Now I think about it I may have read that here.

  31. New owners have to close the club deck?

  32. Boab says:

    That’s an interesting notion. If they didn’t also own the Albion car park, and keep it as a car park, then that might be the case. I suppose that would be down to the Planning Department, though since they made it a condition in the first place it’s hard to see them changing it. Unless the new owner could come up with a suitable alternative.

  33. Ed H says:

    Ibrox Stadium renamed ?

    I can think of a mobile phone operator that would be just the ticket.

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