26/02/2012 2,390 Comments
On first reading of The Sun on Sunday’s article today about Rangers’ player contracts, I wanted to take my customary swipe at the traditional media. On reflection, congratulations are in order.
I am no fan of the Murdoch press, but let us acknowledge a job well done. This story is a quantum leap forward from what has passed as “traditional” reporting in Scotland in recent years. While the Daily Record still seems content to rely upon agenda driven scraps from the table of the Rangers old-guard- the same people who got the club in this mess- The Sun appears to have put in an honest day’s work.
This would have required some genuine investigation and they confirmed their interpretation by consulting with no less than three experts. While sports reporters have vacillated between claiming that tax issues are too complicated to discuss and then spouting comically inaccurate nonsense, The Sun has found a solution that might yet start a revolution: they asked for comments from people who understand the subject! Rather incredibly, I even agree with the article’s general findings. (You could have read much the same here in March of last year, but The Sun has published evidence). It was the absence of reports like this one, about the most important story in Scottish football history, that inspired this blog. So ‘better late than never’ and a sincere chapeau!
The timing of this story is also good. Much of the discussion recently has focused on the issue of whether Rangers’ players had letters saying that loans from the EBT did not need to be repaid. While interesting, and sure to become a topic for discussion once the First Tier Tribunal returns with its findings, it is a bit of a red herring.
The central issue in this case is whether the money received by Rangers’ employees from the EBT were “emoluments”. Cutting through the legalese, this basically means that the key question to be determined at the FTT is: did Rangers’ employees receive wages through the EBT that were not properly taxed? Obviously, evidence that the loans were not real loans would blow any pretence that EBT use was legitimate out of the water. If there was also direct evidence that Rangers’ staff were receiving payments that were promised in an employment contract, then it would be very difficult to make an argument that these payments are not emoluments.
Yet, make an argument that they are not wages is what Andrew Thornhill QC has been very well paid to do. In some uncharacteristically well informed posts on the Follow Follow messageboard, I noticed the appearance of the “substance over form” argument as a way of trying to explain away any damaging documentation. Without getting steeped in a comprehensive legal and accounting discussion, “substance over form” is a concept that tries to look through complicated legal contrivances in financial transactions and look only at the meat of the issue: where were we are the start and at the end. It seeks to just “look-through” any special purpose entities or legal trickery designed to complicate matters. How is this relevant? The poster on Follow Follow, is trying to make the point: it does not matter if Rangers have created this blizzard of paperwork all but admitting that they have perpetrated a scam, the “reality” is that the players currently still owe the trust. Therefore, the withdrawals from the EBTs are not emoluments.
This argument has a certain superficial charm. However, the issue with “substance over form” is that it is not for Mr Thornhill QC (or Rangers) to determine what the start and end points of the transaction are. Such a line of reasoning would be effectively asking the tribunal to start and stop at mid-points in the process and to ignore the real substance- that Rangers’ employees received payments from their employer that were not taxed.
So I would agree with the Follow Follow poster. The form of how they were paid (through a trust) should be ignored, especially if there is a mountain of documentary evidence supporting the notion that the substance is that employees’ wages were not taxed. (If there is a lot more evidence like that presented by The Sun, then Rangers’ case would look to be very weak indeed). Of course, if I was a skilled lawyer and one of my instructions was to slow down proceedings to delay an outcome, I would need to find an argument of some sort. An argument that allows me to ask the tribunal to go through the all of the evidence meticulously would be very useful indeed.
Looking to the future, Rangers’ fans need to take a realistic and dry-eyed look at the sort of people who will be running their club in whatever form it takes. The signs are not good that the lessons of the past have been learned.