There’s already been an avalanche of cobblers talked about yesterday’s surprise verdict of the First Tier Tribunal on alleged tax evasion by Rangers. RFC fans are triumphantly howling vindication for their claims that the whole thing was a giant conspiracy, insisting the verdict shows the club hadn’t been cheating for a decade and that it should still be playing in Scotland’s top division. The club’s former chairman even told Scotland Tonight that it wouldn’t have gone into administration at all, let alone liquidation, if not for the pressures caused by the infamous “Big Tax Case”.
The Scottish media, meanwhile, is mostly painting a picture of unadulterated victory for, and terrible injustice against, the Ibrox club. But let’s see if we can cut through the persisting fog, establish some solid facts and lay a couple of myths.
1. The tribunal’s decision was split and may yet be appealed by HMRC.
Self-explanatory. Let’s play to the final whistle, eh?
2. The tribunal DID find Rangers guilty on some counts of illegal EBT use, and there were dozens of others that Rangers didn’t contest.
As far as we can gather no figures have as yet been released publicly on the extent of these. The tribunal stated that the sum originally thought to be owed in tax – £48m plus interest and penalties – should be “reduced substantially” by its findings, but didn’t specify what that actually meant in pounds and pence.
Rangers may well still be guilty of millions, or even tens of millions, of pounds’ worth of tax evasion, and fielding players you can’t afford is still cheating.
3. The tribunal found many EBT deals were indeed loans, not payments.
But, um, can anyone explain to us why footballers on £50,000+ a month need loans? What on Earth could anyone be buying in Scotland that £50K a month won’t cover the instalments on? And if they don’t need loans – which they clearly don’t – what IS the purpose of getting them? That’s a rhetorical question, obviously. The purpose is dodging tax.
(Also, when will they be paid back, and to whom, given that Old Rangers is about to be liquidated? Did Charles Green get these lucrative “debts” with the assets?)
4. When the club went into administration it owed creditors £61 million, NOT counting the Big Tax Case money.
“Administrators Duff & Phelps have accrued operating charges and legal fees of over £5.5m and hold secure creditor status. The finance firm Ticketus is owed £26.7m, while HMRC is owed £21.5m in unpaid PAYE tax and National Insurance. The total amount of money owed to unsecured creditors is listed as over £55m.”
Rangers were losing millions of pounds a year, despite being in the SPL with access to substantial prize money and lucrative European competition. It even managed to continue to lose millions when in the hands of the administrators – a remarkable state of affairs, almost without precedent. It was simply not a viable business, and had no way of paying down its huge debts. It’s impossible to see how it could have avoided going into administration with or without the BTC.
5. “If not for the BTC, Rangers could have exited administration via CVA.”
Demonstrably not true. To succeed a CVA needs to be approved by 75% of creditors (by value). At £21.5m out of £61m, HMRC had roughly 35% of the debt and was not prepared to accept a CVA, which means that the maximum possible vote in favour was 65%. The CVA would still have failed.
(As an unsecured creditor HMRC would have nothing to gain by accepting. The amount of money in the creditors pot is small, and after Duff & Phelps’ fees will be close to zero. The assets were theoretically worth far more in a fire sale, and many serious questions remain to be answered about why Charles Green was able to buy them uncontested for a tiny £5.5m.)
6. “Everything would have been fine if Craig Whyte hadn’t stopped paying PAYE and NI when he took over.”
It’s true that the PAYE/NI debt run up exclusively by Whyte was what technically triggered the administration process. But that debt represents, as we’ve seen above, just over one-third of the club’s liabilities. Without it, Rangers would still have owed £40m+ and had no way of paying it back. The club would still have been unviable, and administration would still have loomed on the horizon.
Sooner or later, had Craig Whyte not stepped in, the club would have folded under the weight of the £18m debt to Lloyds Bank, which the bank was no longer prepared to indulge (see below). Nobody else was beating down David Murray’s door to take Rangers and the Lloyds debt off his hands, although he was by now desperate to offload the club – finally giving it away for £1. When he’d attempted to raise the cash from “loyal” fans via a share issue, it failed spectacularly, with Murray himself eventually having to take up around 98% of the shares.
(Some Rangers fans insist that the club wouldn’t have been up for sale in the first place if it didn’t have the Big Tax Case hanging over it. But we can easily establish that this is nonsense. This Telegraph piece from October 2009 shows that Lloyds had already been effectively controlling the club that year in highly aggressive pursuit of their money, and seeking a buyer. HMRC didn’t start their investigation into possible illegal EBTs until months later, in the spring of 2010.)
Whyte paid the Lloyds debt off with the money from Ticketus, and in doing so bought Rangers a few more months of life when nobody else would. Casting him as the villain and Murray and the fans as the innocent victims is laughable.
So let’s get some perspective. Rangers Football Club was an economic basketcase, circling the drain long before Craig Whyte showed his face, even regardless of the Big Tax Case. The FTT has found that the club WAS cheating both the taxpayer and the rest of the SPL by paying players illegally in at least some cases.
When the “oldco” club is finally liquidated, very little money will be recovered for creditors. The taxpayer – your schools, your hospitals, your libraries – will have been robbed of at least £22m. Ticketus will have been robbed of almost £27m. Countless small creditors – local businesses, small shareholders – will have been robbed of smaller sums which might still be enough to bankrupt them. Fans with debentures will have been robbed. Other football clubs will have been robbed of trophies they might have won if Rangers had been properly ejected for breaking the rules.
(We’re still waiting on the reconvening of the SFA’s Appellate Tribunal – remember that? – and the SPL’s investigation into dual contracts, which is not directly affected by the FTT verdict. Even if the EBTs were legal in themselves, they have to be declared to the SFA, and failure to do so fully is a rule breach carrying the severest penalties.)
The bottom line is that Rangers have still cheated, and they would still have collapsed. In effect, then, the First Tier Tribunal’s judgement – even if it’s not successfully appealed by HMRC, which it may well be – changes the score but not the result.