Illegal Use of EBTs & Other Issues


Correcting the constant stream of misinformation from the Scottish media has become a tiresome chore. However, in the face of repeated failures of print & radio journalists to check their facts, the task of setting the record straight falls on us: unpaid, amateurs working on a handful of blogs covering Scottish football.

“No one is accusing Rangers of doing anything illegal”
This “misstatement” was started by Rangers’ former chairman, Alastair Johnstone almost two years ago, and is said to have been repeated by Mike McGill of MIH this week. It is nonsense. Rangers have been accused of breaking UK tax law. They stand accused of pursuing an illegal tax strategy. It appears that some journalists lack the skills and/or work-ethic required to research the difference between criminal and civil proceedings.

No one is saying (or has said to the best of my knowledge) that Rangers are facing criminal charges. However, the First Tier Tribunal (Tax) on whose findings we are all waiting, will determine the legality of Rangers tax strategy. If the FTT(T) finds against Rangers, it will have deemed that the strategy used by Rangers for over a decade was indeed illegal. I struggle to believe that any hack is so stupid as to not understand this issue. One wonders if recent contact with Sir David Murray has dulled the investigative zeal of the five hand-picked journalists who were recently granted an audience. I could be wrong. Maybe they were just “duped”? Does this word mean “to have been misled voluntarily?”

Why are there no criminal proceedings?
As we saw with the Harry Rednapp trial, what appears to the general public as an open and shut case, can be very difficult to prove. Weeks of pouring over arcane legal details and endless pages of numbers would drive any jury to distraction. Bored jurors become prey to skilled advocates for the defence resorting to emotional arguments and playing on the likeability of the man in the dock. If it was Rangers on trial, it could be difficult to find a jury that would agree to convict regardless of the evidence presented. (The same might also be said of Celtic). In Rangers’ tax tribunal, three expert judges with extensive experience in tax law will decide.

Mens rea- presents a problem. This legal concept means that prosecutors would have to prove that Rangers, or any individual directors charged, were fully aware that what they were doing was criminal.  As we will see later, some individual actions do appear to be criminal in nature.  However, in Scots Law, we have an additional problem: corroboration. Individual pieces of evidence need to be supported by other submissions in criminal trials. In Scotland, it is difficult to both prove that someone intended to act illegally when breaking tax law and to have enough evidence to support corroboration. This means that criminal convictions for tax evasion are rare. The network of disreputable people who profit by taking advantage of distressed businesses- e.g. by pocketing their withheld tax- deliberately exploit this difficulty of obtain convictions. There is a certain poetic irony in Rangers’ situation- both beneficiary and victim of a flawed system.

Take these factors together and the decision to pursue Rangers through the civil court system will almost certainly be shown to be a wise one. But be in no doubt: Rangers have been accused of acting illegally.

Changing the subject entirely-

Why are Duff & Phelps going to court to get Ticketus deemed to be a creditor?
This issue has been butchered by our friends in the Scottish sports press as well. So I will try to undo some of the damage.
Ticketus believe that they have purchased £20m worth of heavily discounted Rangers tickets over the next four seasons. (The VAT that was not paid to HMRC would not count as Ticketus’ debt). No one in their right mind would want to buy a football club that is obligated to give away an average of 25,000 season tickets per year away to another company. (This would cut Rangers’ turnover in these years by almost half). It would be best for Rangers if this £20m is considered to be a debt. If it is a debt, Ticketus could be forced- under the right conditions- into a “cram down”.  In this situation, they would have to accept the same reduction in the value of debt as the other creditors.

When could a “cram down” happen? If more than 75% of the creditors agree to a reduction in the value of their debt, then all of the debt holders will have the amount they are due reduced proportionately. If Rangers’ total debt after FTT(T) result is returned exceeds £80m, and if Ticketus was treated as an unsecured creditor, they could no longer block a Company Voluntary Arrangement (CVA).

So what will happen? Without access to the executed version of the contract documents for the Ticketus deal, it is really impossible to say. It is hard to imagine a situation where you think you have bought an asset but had accidentally granted a loan. Yet, Rangers’ difficulties have thrown up many surprises. A few more can be expected. I would assume that Ticketus’ rights to the tickets will be upheld until we hear otherwise.

If Ticketus win their case, they would effectively control Rangers’ future. Owning over 100,000 tickets for a team that no longer exists will not do Ticketus any good however. So they will be inclined to push the other creditors for a CVA. However. they would be able to demand better terms for themselves than the creditors as their price of not liquidating Rangers. This reduces the incentives for the actual creditors to do a deal on any terms.
In a complicated game of Russian roulette, the various parties all understand that the debt level will greatly exceed any price that a buyer will pay. So Ticketus, Craig Whyte, and the unsecured creditors, such as HMRC, will play an elaborate game of bluff and bluster hoping to scare each other with threats of getting less (or nothing) in liquidation.

How will it end? My money is still on liquidation and a lengthy series of court battles that bleed Rangers FC dry in the meantime. Do not forget that Craig Whyte’s ominous silence is unlikely to mean that he has abandoned his floating charge.  However, only a fool would see any certainties in this mess.

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.

1,032 Responses to Illegal Use of EBTs & Other Issues

  1. Night Terror says:

    Derek says:
    18/03/2012 at 1:50 pm

    Night Terror says:
    18/03/2012 at 1:40 pm
    0 0 i
    Rate This
    @martybhoy
    If a clubs’s creditors are >25% the bank, they can forget agreeing a CVA.
    ============================
    nothing to do with “the bank”. Its >25% by value of the club’s creditors

    ?

    *tries again*

    If the bank is owed >25%, CVA very unlikely

  2. monster_mind says:

    martybhoy says:

    18/03/2012 at 1:34 pm

    Getting a wee bit worried about Paul Murray’s ‘red herring’ description of the BTC.He seems supremely confident that even if another sucker punch @ circa 50 mill was loaded on to the overall debt,then it would proportionately reduce the pence in the pound offer in a CVA.

    Not an accountant or a lawyer but if HMRC accept this then RFC(ia) will come out of administration just as most other SPL teams enter into it, to take advantage of Hector’s new found laissez fare attitude to paying of taxes.

    Sounds too simplistic but could this happen?

    That’s why I think that Murray’s bid must be either :

    a) conditional on a CVA being agreed

    or

    b) it is simply a NewCo bid for the assets and the money they pay for the assets will be split between the creditors of the OldCo when it is liquidated.

  3. scapa says:

    Night Terror says:
    18/03/2012 at 2:06 pm

    Tries again and again and again 😉

    Given that for the last 20 years or so, RFC( under Interim Management) have used HMRC, and by extension the tax payer, as a chuffing bank, then yes;

    “If the bank is owed >25%, CVA very unlikely” = True

  4. Night Terror says:

    Hoopy 7 says:
    18/03/2012 at 1:50 pm

    It is time for Regan, and I have said this before, to stand up to the Blazers. We need a complete clear out of all the self serving, self interested cronies who have filled their wallets.

    An independent Judicial Inquiry should be set up to ascertain what was wrong and what is wrong and recommend a solution to the governance of our game.

    What does a Blazer who has never even played the game at school level know about the game?

    I don’t think the problem is a lack of people running the game who have played football.

    I’m going to assume you’re not suggesting the judicial review would be performed by people who used to play football, but I would suggest that the problem is that there are not enough people with experiences outside football running the game, and that there is not enough transparency and accountability to hold these people to account for their performance.

  5. Moi says:

    Aargh, Modded for the dreaded ‘H’ word in headhvnted. 🙂

    Hoopy 7 says:
    18/03/2012 at 1:50 pm

    ……What does a Blazer who has never even played the game at school level know about the game?

    Good call Hoopy, we have all known that since our teenage years haven’t we?

    I remember reading (it may even have been here in the early days) about the Australian sport model where the Aussies headhvnt the young, dynamic retired sportsmen/women to head up their respective sport authority.

    Shirley that must be the way forward?

    The absolute radical alternative to that option is one that was only whispered until the RTC genesis is;

    SFA, can you just do your freaking job please?

  6. Cortes says:

    Discipline Daddy, let’s hope Alex Thomson has a a fare to Edinburgh this week. Or soon.

  7. Night Terror says:

    @martybhoy, @scapa, @derek

    I see the confusion. I was replying to this suggestion of martybhoy’s:

    “RFC(ia) will come out of administration just as most other SPL teams enter into it”

    As most other clubs have the bank as their major creditor rather than HMRC, this scenario is very unlikely. You can’t just declare administration to suit.

    Apologies for crossing everyone’s wires.

  8. Jim Farry's lawyer says:

    Moi says:

    18/03/2012 at 2:13 pm

    Aargh, Modded for the dreaded ‘H’ word in headhvnted.

    Hoopy 7 says:
    18/03/2012 at 1:50 pm

    ……What does a Blazer who has never even played the game at school level know about the game?

    Good call Hoopy, we have all known that since our teenage years haven’t we?

    I remember reading (it may even have been here in the early days) about the Australian sport model where the Aussies headhvnt the young, dynamic retired sportsmen/women to head up their respective sport authority.

    Shirley that must be the way forward?

    The absolute radical alternative to that option is one that was only whispered until the RTC genesis is;

    SFA, can you just do your freaking job please?
    ______________________________________________________________________________

    And who does the headhvnting? The existing blazers? If so, that model applied in Scotland might get us something resembling the panel for the 5live discussion…Hately, Gorum etc. 😦

  9. Auldheid says:

    martybhoy says:

    18/03/2012 at 1:34 pm

    There is a reason why HMRC do not do deals. Whilst their job is to collect and pass on the money for redistribution according to policy, at no time in the cycle is it HMRC’s money, its OUR money.

    It is money the citizen has agreed to put in a pot to enable a civil society. When money that should have gone into the pot is witheld by means that are are illegal (and the FTT will judge) then the taxpayer is being robbed.

    To do a pence in the pound deal HMRC would be saying that the taxpayer is happy to be shortchanged and the argument that lessening the amount of shortchanging makes the original illegal action acceptable would neve stand up. Damage limitation in any particular case maybe, but the wider damage done by the perception that tax can be avoided in full or partly would be much greater.

    I think Murrays point is more of ” in for a penny, in for a pound(ing”. When the dust settles and if HMRC get the verdict HMRC have to pursue full settlement.

    Their problem is the gaps in the insolvency law that put them at the back of the queue. These need another look with stricter criteria for identifying and challenging a phoenix if one arises and taxing them according to the phoenixes projected income.

    There can be no deal with robbers but a deal to recover some of the proceeds of the robbery from a business that has only been able to continue the consequences of that robbery being circumvented would surely deter the CWS of the world?

  10. Moi says:

    Jim Farry’s lawyer says:
    18/03/2012 at 2:19 pm
    And who does the headhvnting? The existing blazers? If so, that model applied in Scotland might get us something resembling the panel for the 5live discussion…Hately, Gorum etc.
    ——————————————————————————————————————

    I posted what I thought was a positive alternative mate.

    Can you remind me again of yours please?

  11. Lucculent Sam says:

    rangerstaxcase says: 18/03/2012 at 11:58 am

    Campbell Ogilvie: there is no middle ground that I can see. You are either complicit in directing illegal tax strategies at Rangers (and possibly at Hearts) or you are an incompetent buffoon unfit to hold executive office at the SFA.

    RTC, there is option (c): Campbell Ogilvie is complicit in the illegality AND an incompetent buffoon.

    And if he’s unfit for executive office at the SFA, he’s also unfit to be the director or officer of a UK limited company. It’s just nonsense for him to claim that he “didn’t know” about player contracts/registrations or their EBTs when he would have had a legal duty to know about these things as company secretary.

  12. rab says:

    Interested observer.

    Thanks.

  13. scapa says:

    Lucculent Sam says:
    18/03/2012 at 2:45 pm

    There does seem to be a truely staggering number of upstanding members of “institutions” who have either no concept of, or, completely ignore, their duties as a company director, that I’m forced to think that a number of them will end up being banned from holding the office once all this shakes out.

    However, I won’t be holding my breath.

  14. Jim Farry's lawyer says:

    Moi, I wasn’t having a go. Having guys who have actually played the game running it would be good. I was just pointing out that if it’s the SFA doing the picking then I doubt you would get anyone you would want. Remember this is the bunch that thought Gordon Smith was the answer.

    But since you ask, I’d like to get back to one League body and one overall administrative body in the SFA. No serving on both bodies. The SFA would be a slimmed down rules/oversight/regulator. No “blazers” sitting on endless committees and enjoying the perks of travel round the world.

  15. Chazz says:

    R.e CVA.

    Why didn’t Hearts do a CVA with the tax man? Why did Hearts get a winding up order? I’m not being scurrilous but genuinely curious. I know there must be differences between themselves and RFC’s situation but unsure what they are.

  16. Allyjambo Taxpayer says:

    Chazz says:

    18/03/2012 at 3:14 pm

    Simple answer is, they’re not in administration. And, of course, as the the vast bulk of their debt is owed to their owner he’d only be agreeing to a CVA to himself. Would be a bit daft wouldn’t it?

  17. Stan Black says:

    Lennon messes with the team and Celtic draw with Aberdeen. Lennon messes with the team and Celtic lose to Kilmarnock.

    Starting without Samaras on the wing was a real error, one that he seems to repeat when it matters.

  18. StevieBC says:

    New post up.

  19. patnajoe says:

    Have it from reliable source far east consortinum is Indian Resturant owner from Prestwick phoned for a laugh recieved 6 inch piece in red top DR

    Honest No joke

  20. patnajoe says:

    Jim Farrys Lawer 3:11pm.

    Guys runing the game whoe played the game hope you are not talking about Mr Goram Mr Hateley etc . I know where you are coming from but it need’s to be the right ex pro’s

  21. patnajoe says:

    PS. Where is all the posters talking about level playing field’s now Killie’s just beat us in a Cup Final.
    without the cheats it is level

  22. Trimm trab says:

    Any team can beat any other team in the SPL – the difference with the old firm is the far greater squad which shows over a season – every season. Most SPL sides barely have a decent first 11 let alone some depth. Well done killie that was a good game.

  23. resinlabdog says:

    patnajoe says:
    18/03/2012 at 5:49 pm

    Tomorrow some of those Killie fans will be waking up with hangovers the size of an EBT.
    Fair play to ’em all. Hope they enjoy their Ogilvie… richly deserved.

  24. ParmaHamster says:

    Franchesco De La Penya says:

    18/03/2012 at 10:55 am

    There is one Director of Rangers that we all seem to have forgotten about. He Joined them for a few months and was instantly warmed to by their fans as he sat and walked amongst them at matches. He was there first ever RC raised one too, yet he left shortly after without any coverage from the MSM. He is also a highly regarded Finacial Director who could not easily be fooled once he was shown “how things are done around here.”

    If I was guiding the non Scottish based journalists to where they can find the real story and ultimatly the proof we all need to confirm the cheating on the grandest scale in our wee country then he is the man.

    ____________________________________________________________________________

    Pretty sure that Bob Brannan was the man referred to here.

    Was installed in CO’s place in March 1998 with major fanfare from the hacks.

    Left in January 1999 – no reason given, but rumours still persist over an argument with Sir Minty Moonbeam over the wages-turnover ratio increase since the arrival of the Wee Genital and the means used to acquire certain players.

  25. Goosy says:

    Wouldn`t it be great if the two CEOs, Doncaster and Regan could jointly announce their resignations and declare they were leaving because neither the SPLBoard nor the SFA Board would agree to an independent enquiry into whether these bodies have brought the game into disrepute by their handling of the EBT scandal

    Do either of these guys have the integrity to leave with dignity ?
    or
    do they see this scandal as simply an unfortunate bit of bad publicity brought about by some sloppy management ?
    You know
    Something we can fix by dropping a few hints in the right direction ?
    Do they really think this is yet another storm in a teacup that can be quietly mopped up?
    Like the Dallas storm and the DougieDougie storm and the Farrystorm of years ago?

    Don`t they understand the old media is crumbling before their very eyes?
    Havent they noticed that their use of Twitter generates the opposite response to what they intended?
    Can`t they see that thousands of internet bampots pursuing the truth can never be offset by “carefully spun” handouts to the paper press ?

    ,,,,,,,,,,,,,,,,

    Or are they seriously telling us that the 11+1A clubs who make up the SPL are so content with the reputation of the SPL and SFA bodies that they condone this cover up

    If they do then speak up Mr Doncaster and Mr Regan

    Tell us that every single SPL Club are happy that

    …..Nimmo Smiths reports remains unpublished
    …..SFA President Campbell Ogilvie holds discussions with the architect of EBTs in the same week that the SPL are conducting an investigation into these matters
    …..SFA President continues to hold office despite admitting he benefitted from the same EBT scheme that has already been condemned by HMRC an admitting his incompetence at signoing off RFC accounts

    Because if our clubs are complicit in this scandal by supporting this corrupt organisation

    We want to know

  26. JJG says:

    Thank you for cutting through all the crap and saying it as it us. The fog of the Scottish media is hard to see through! I really appreciate the work you continue to do on this.

  27. Dry As A Dead Dingoes Donger says:

    Justinian says: 18/03/2012 at 7:51 am
    “D4, Get yer sheep locked up in the Barn immediately.
    Jabba is on his way to OZ for 3 weeks – whether private or business I do not know. Any connection between the rapidly increasing pace of the end game and his sojourn is entirely coincidental.”
    ————————————————————————
    Oh bloody great, I’ll be able to do a rendition of that Rolling Stones classic, “Hey Macleod get off O’ my Ewe”.
    He’s a bit late for the Mardi Gras, but if I come across a pot belly pig wearing lipstick I’ll know who it is and I won’t be held responsible! He’ll just have Wheeee, Wheeeee, Wheeeeeeee… all the way home! 🙄

  28. The Bone Man says:

    I may be completely off the mark here, as I do not claim to understand the workings of high finance, but common sense suggests these points to me.

    RE – Ticketus.

    Why are Duff and Phelps so eager to prove that Ticketus are creditors? Perhaps because if the monies aren’t secured on season tickets they can then prove that the deal was in fact a loan to Craig Whyte, who rumour has it is their good friend.
    This, if proven, would then be a disaster as Craig Whyte would have, essentially, put £18 million into Rangers and his status as preferred creditor solidified and, pretty much, cast in stone.

    RE – £3.6 IN Client Account

    If the Ticketus loan deal were secured on Season Tickets, which are a consumable, then if the loan repayments are missed, then V.A.T. would be payable on the Season Tickets, but not until they had been taken by Ticketus for non-payment by RFC. Therefore, since the original Ticketus deal was for £18 million, the £3.6 million in the Client Accountm was being held to pay V.A.T. if the deal went sour. 20% of 18 million being 3.6 million.

  29. Weeron says:

    Just a thought….
    How interesting would it be, if the Trust made payments to people who were not ‘officially’ employed by Rangers?

    Would be interesting for sure. Is the SFA planning to look at the entire Trust account, incoming and outgoings?

  30. Peter says:

    Hoopy 7 says:
    18/03/2012 at 1:50 pm

    Do you mean someone in the mould of Gordon Smith an ex player rather than the “Blazers” should be running our game?

  31. James says:

    What’s the chance of this dragging out in the courts until next season? How can Rangers afford to pay the legal fees, as well as Duff and Duffer? When do the season tickets have to be paid? With UEFA getting involved, and foreign football teams voicing their displeasure, surely Rangers and the SFA have no where to hide.

    And respect and thanks to all of you for your views, thoughts and insight.

  32. Alan says:

    “The administrators’ legal advisers have asserted that the STA is illegal on the ground that it was an agreement for the giving indirectly by Rangers of financial assistance for the acquisition of its shares contrary to section 678 of the Companies Act 2006. The existence of this challenge is not however relevant to the directions which I have to give as I must assume at this stage that the Ticketus agreements are valid.”

    This was outwith the remit of the current case, but I can see the argument above being Plan B for the administrators now that they haven’t been told what they want to hear straight away. Can see Rangers v Ticketus (round 2) as a distinct possibility!

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