TaxCorporate TaxAdvisers split on Rangers tax case ruling

Advisers split on Rangers tax case ruling

A further round-up of reaction following the Court of Session's ruling that Rangers FC's EBT structure between 2001 and 2010 did not work

Advisers split on Rangers tax case ruling

THE DUST has yet to settle for many following the Court of Session’s ruling that Rangers FC’s use of Employee Benefits Trusts did not work and therefore taxable, with consensus among advisers thus far proving elusive.

Last week, the court held the corporate entity which formerly housed Rangers, now in liquidation (oldco), had run a contrived EBT structure between 2001 and 2010 to pay £47.65m to players and staff in tax-free loans.

Jolyon Maugham QC of Devereux Chambers has produced a detailed three-part blog outlining his opinion that the Court of Session’s ruling is wrong. The crux, Maugham argues, lies in when the player or employee has ownership over the cash they have received. The fact the monies were loaned to the players and staff rather muddies these waters given the cash could technically be recalled to the trusts.

“We are taxed on our actual pay – and not on what we might have been paid had we negotiated a different package with our employer,” Maugham adds. “We are free (at least if we do it right) to agree with our employer a package that involves us getting less stuff that does give rise to a tax liability (for example, pay) and more stuff that doesn’t give rise to a tax liability (for example, child-care vouchers or pension contributions). And if we make that choice then we pay (the lower) tax on our actual pay package rather than (the higher) tax on what we might have negotiated. I’m not sure that the Court of Session fully appreciates this.”

Tax justice campaigner Richard Murphy disagrees, though. He argues the Rangers players and managers all agreed to work for the club.

“They did not do so with gratuitous intent,” he wrote in his blog. “Nor did they do so with any expectation that the sums they would be rewarded with would be discretionary… The truth is that everyone working for Rangers knew three things: The first was that they would be paid; the second was they knew how much they would be paid: and the third was that however the EBT was structured these obligations would be honoured.”

Regardless of the rights and wrongs of the ruling, advisers do agree the consequences are significant for those operating EBTs.

“Unless it is overturned in the Supreme Court, it essentially blows out all EBTs and EFRBS,” Rebus Investment Solutions head of client relations Martin Taylor told Accountancy Age. “In simple terms, the court now says that the technical arguments approved by the commissioners and the tribunal in those cases should have been dismissed by an overriding ‘substance over form’ argument. Most firms selling EBT and EFRB structures used very detailed and well-reasoned counsel’s opinions.”

Pinsent Masons tax director Paul Noble agreed, noting HMRC will use the ruling to settle with EBT users, with accelerated payment notices and follower notices likely to be called upon.

“The basis of the decision was not the result of a small technicality: rather, the judges’ interpretation that ‘common sense’ should prevail and money received as a result of employee services should be taxable,” he told the firm’s Out-law blog.

Related Articles

‘Google tax’ nets HMRC £281m

Corporate Tax ‘Google tax’ nets HMRC £281m

1w Emma Smith, Managing Editor
OTS report: Corporation tax should follow accounts

Corporate Tax OTS report: Corporation tax should follow accounts

2m Alia Shoaib, Reporter
HMRC tax evasion assistance requests double in five years

Corporate Tax HMRC tax evasion assistance requests double in five years

3m Emma Smith, Managing Editor
Tax crackdown brings in £468m for HMRC

Corporate Tax Tax crackdown brings in £468m for HMRC

8m Accountancy Age editorial
Treasury Select Committee report released on Making Tax Digital

Accounting Standards Treasury Select Committee report released on Making Tax Digital

8m Stephanie Wix, Writer
Spring Budget 2017: Making Tax Digital

Business Regulation Spring Budget 2017: Making Tax Digital

7m Shereen Ali, Deputy Editor
Tax fraud loses HMRC £16bn

Corporate Tax Tax fraud loses HMRC £16bn

7m Emma Smith, Managing Editor
HMRC nets £2.6bn in corporate tax from big businesses

Corporate Tax HMRC nets £2.6bn in corporate tax from big businesses

8m Accountancy Age editorial