Chairman takes another swipe at ousted board

HMRC wins ‘big tax case’ as Rangers cuts losses

Dave KingThe tax office has won its long-running claim against Rangers’ use of Employee Benefit Trusts (EBTs).

Three judges at the Court of Session in Edinburgh have upheld the appeal from HM Revenue and Customs against the OldCo.

Rangers used the scheme from 2001 until 2010 to give millions of pounds of tax-free loans to players and other staff.

In what became known as the “big tax case”, HMRC claimed these were salary payments and subject to tax.

HMRC lost its appeals at tax tribunals in 2012 and 2014.

This time Lord Carloway, Lord Menzies and Lord Drummond Young ruled in favour of the tax office, agreeing that Rangers’ use of EBTs amounted to “a mere redirection of earnings which did not remove the liability of employees to income tax”.

Former chairman Sir David Murray had argued that the payments – which amounted to almost £49 million – were loans and not taxable income.

Today’s ruling has no impact on the new regime. Instead the tax liability is likely to lie with the liquidated company.

The ruling could call into question the validity of the league titles Rangers won during the period. Lord Drummond Young said in his ruling: “As the footballers are concerned, at least, it seems to us that if bonuses had not been paid they might well have taken their services elsewhere.”

The ruling coincides with annual figures from Rangers Football Club which said it had cut its loss to £7.5 million.

Chairman Dave King insists the figure does not reflect the progress made since his consortium took control in March.

The loss compares to an £8.1m deficit in the previous year and Mr King said the current year is “already much more promising on all fronts”.

Revealing the annual figures, he said the year under review had been “a difficult one – both on and off the field. It was another year of turmoil for the company and the club.”

He took a swipe at the former regime, accusing the ousted board and executive management of being “disconnected from supporters” and this has had a “negative impact on the commercial operations”.

Match attendances and season ticket sales were at a particularly low level. The “fan boycott” contributed to this and, while the boycott was controversial, “it did contribute significantly to the removal of the previous board”, he said.

The low revenue from poor ticket sales was compounded by the ongoing unwillingness of supporters to spend the historical levels of money on the club’s retail activities.

“This is partly because the team is playing in a lower league and there has been no European football to generate interest and excitement,” said King, who took another opportunity to reference he spat with Sports Direct over the merchandising agreement.

He said: “Even more damaging, has been the well-publicised concerns about the circumstances surrounding the negotiation and implementation of the arrangements with Sports Direct and the commercial terms that were agreed to by the board at that time.

“The poor performance of the retail business continues to exercise the collective mind of the board. Unfortunately, Sports Direct secured a gagging order against the company and its officers that prevents me from fully expressing my feelings on how this important part of our business has been managed under the stewardship of Sports Direct and its senior management.”

Mike Ashley, majority shareholder in Sports Direct and a near-9% shareholder in Rangers, has instructed lawyers to pursue a claim that Mr King has breached the terms of this order which he says could result in a custodial sentence.

Mr King’s notes in the annual report do not hold back in his criticism of the Ashley board.

“Certainly, the poor business practices and governance failures are not something I would expect of a large public company,” he says.

Ibrox“The extensive and ongoing coverage of the club’s off-field activities also impacted negatively on the image and reputation of the Club as a result of key individuals resorting to the use of leaked and often false information to the media as a tool to advance the interests of certain stakeholders to the detriment of others.

“During the fourth quarter of the financial year this was halted after the complete removal of the board of directors to be replaced by a new board that has already successfully re-engaged with the support base and has installed a new executive team both on and off the park.

“Unfortunately, due to resistance from the previous board, this change in structure was too late to impact on the performance for the year under review.

“To some extent, the off-field disruptions must have impacted on the team’s performance. It was immensely disappointing that the team found the challenge of winning the SPFL Championship beyond them and subsequently failed to advance even via the playoffs. The new board immediately set about ensuring that this will not be repeated and the Club now has a management structure in place that understands and accepts that playing in the SPFL Premiership next season is a “non-negotiable”.

“The team has been significantly improved to meet this challenge and plans are already in place to ensure that further improvements will be in place before the start of the 2016/2017 season.

“The year underway is already much more promising than the year under review and I look forward to this time next year when I can comment on a financial year that is wholly under the influence and guidance of the new board.”

Last week, the board said it was postponing plans for admission to the ISDX market and a share issue until criminal proceedings against former directors Craig Whyte, Charles Green, Imran Ahmed and others are concluded.

The club said it was “satisfied” there was no short term need for the funding the share issue would have generated.

Rangers’ operating expenses for the period were down from £27.7m to £26.8m, while turnover fell from £17.6m to £16.5m.

Leave a Reply

Your email address will not be published. Required fields are marked as *

This site uses Akismet to reduce spam. Learn how your comment data is processed.