Rangers ruling ‘could have negative impact on Yorkshire businesses’

A general view of Ibrox Stadium in Glasgow. PRESS ASSOCIATION Photo
A general view of Ibrox Stadium in Glasgow. PRESS ASSOCIATION Photo
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THOUSANDS of business across Yorkshire and the UK could face a massive additional tax bill following a legal ruling against Rangers FC, it has been warned.

Earlier this month HMRC won a long-running battle with Rangers after the Supreme Court unanimously dismissed an appeal by the Club’s liquidators over whether payments to players and staff could be taxed.

The dispute, which ultimately contributed to the club’s financial demise and subsequent relegation to the bottom tier of Scottish football in 2012, concerned so-called Employee Benefit Trust (EBT) schemes.

Between 2001 and 2009 just under £50m was paid to Rangers employees through EBTs. The club treated the payments as loans, whereas HMRC contended they were taxable earnings.

The court’s decision is not expected to have any impact on Rangers FC in its current form as the club is owned by a different company.

However Leeds-based accountancy firm Hentons is warning thousands of businesses in Yorkshire could face a bill from HMRC following the ruling.

A Rainbow is pictured through the gates of Murray Park Training Ground, Glasgow. PRESS ASSOCIATION Photo.

A Rainbow is pictured through the gates of Murray Park Training Ground, Glasgow. PRESS ASSOCIATION Photo.

Gary Clarkson, director of tax strategies at Hentons, said: “Many businesses set up EBT to provide a tax efficient and legitimate way to reward employees. However, the scheme was also used by some firms as a vehicle to avoid tax, and this ruling will give HMRC the precedent to pursue billions in unpaid tax.

“If your business used an EBT it is important to seek advice from an accountant to understand if you are at risk and get professional support when dealing with the taxman.”

Hentons advise that any firm that receives a follower notice from the HMRC should immediately seek advice from an accountant.

The HMRC issues a follower notice if you have used a tax avoidance scheme that has similar arrangements to one that HMRC has successfully challenged in court. It asks you to settle your tax affairs with HMRC or pay a penalty.

Mr Clarkson said: “Business isn’t powerless when faced with legal action with the taxman. Both sides need to meet stringent legal requirements. It’s vital that taxpayers make sure HMRC fulfil their legal obligations and requirements. Professional support will ensure a more equitable process.”

The background to the case stems from the colossal financial losses Rangers continually posted during the 1990s and 2000s during which time the club enjoyed considerable on the field success.

Following the purchase of the club by Craig Whyte in 2011 the club’s financial situation continued to deteriorate and in February the club formally entered administration with debts estimated to be well over £100m.

A 10 point points deduction was imposed on the club and a proposed Company Voluntary Arrangement (CVA) was rejected meaning the company which was running the club could be liquidated. The club’s ownership eventually was transferred to Sevco Scotland.

Several attempts were made to rescue the club, including from former manager Walter Smith but all of these failed.

The club was denied re-entry into the Scottish Premier League after all of its fellow member teams bar one rejected the proposal. The club would as a result suffer the ignominy of being relegated to the bottom tier of Scottish football.

It has since won promotion back into the SPL. Meanwhile rival club Celtic FC has called for a review of the decision that Rangers had not enjoyed a sporting advantage from the EBT scheme. A league commission from 2013 ruled that Rangers should keep all trophies won during the period the scheme was in operation. Concern now lies for other football clubs who could find themselves affected by the decision.