Rangers oldco liquidators set to take 'Big Tax Case' to a Supreme Court appeal

Contact has been made with former Rangers owner David Murray over the case.

The move would make the liquidators the prime movers in the challenge of the decision by three judges at the Court of Session in Edinburgh that Rangers' use of Employee Benefit Trusts (EBTs) broke tax rules.

The big tax case decision brought the debate over "tainted titles" into the public arena again with some calling for the club to be stripped of titles and competitions won in the years the EBTs were used claiming Rangers had obtained an unfair sporting advantage.

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

After the latest tax case judgement the Scottish Professional Football League held an emergency meeting at Hampden Park to discuss whether it means sporting sanctions were either justified or workable. 

But an appeal would put any question of further sporting sanctions on the back burner.

The judges agreed with HM Revenue and Customs which argued that the use of EBTs were a way of paying players, managers and other staff and should be taxable like all salaries. Former owner Sir David Murray had twice successfully argued at tax tribunals that they were loans and therefore exempt.

The appeal judges, Lord Carloway, sitting with Lord Menzies and Lord Drummond Young ruled that if income was derived from an employee's services, in their capacity as an employee, it was an emolument or earnings and "thus assessable to income tax".

The liquidators would have to apply to the Court of Session, which handed down the judgment to ask for permission to appeal.

The argument expected to be put forward by way of challenge is that the application of common sense over the substance of the law, was wrong.

A BDO spokesman said in an official statement: "The Joint Liquidators are still considering their options in light of the court's decision. The Joint Liquidators intend to consult further with their legal advisors and the Liquidation Committee before making a decision about whether to appeal the case. No decision has yet been made."

Liquidators have previously confirmed that £72m of the £94.4m owed to HMRC relies on the taxman's claim that Rangers was liable for its use of EBTs.

Many believe the threat of the potentially crippling tax case led to the bank insisting the club debts were cleared, resulting in a disastrous sale to venture capitalist Craig Whyte, a subsequent liquidation, and the decision to put Rangers in the Third Division.

A taxman victory meant that the maximum amount of debt potentially left by the oldco would remain at the £168.8 million and would undoubtedly result in minimal payouts to other creditors.

However the extra costs from a protracted court case will further reduce the creditors pot which has stood at £18 million.

A group of Murray firms including parent company Murray Group Holdings Ltd , had been defending the claims.   However the courts have been told they have since gone into liquidation leaving BDO and the Rangers oldco as the only opponents.

During the July appeal, the Court of Session heard the HMRC maintain that both a First Tier Tribunal and an Upper Tribunal, chaired by judge Lord Doherty, erred in dismissing their claim that EBTs should be taxed.

Lord Doherty

The taxman maintained the effect of previous tax tribunal decisions in the case is that employees can avoid paying income tax by agreeing that payments be made to others of their choosing, rather than getting the money themselves.

But the new judgement which is now set to be subject of a new challenge said that the “true nature” of the individual transactions was that bonuses were paid into the trusts on the basis of the work performance of the employee in question, and the profitability of his employing company.

Rangers fan groups have previously accused the HMRC of wasting millions of pounds of public money in its "witch-hunt" in pursuit of what it called a "phantom tax debt" before the November 4 judgement.

Some have raised questions over why HMRC began to target the club in the spring of 2010, nine years after the club starting using the scheme and as EBT loopholes were being closed through legislation.

After the latest judgement was announced, HMRC said it would aim to challenge other EBT cases.

In 2011, an initiative was launched allowing taxpayers using EBTs to seek a financial settlement to resolve their liabilities without incurring crippling penalties.

Over the following four years, users of roughly 800 schemes used the settlement opportunity, raising around £1bn, according to HMRC.

It was estimated that beneficiaries of a further 5,000 or so schemes were yet to settle.

But from March this year, taxpayers using EBTs lost access to a scheme allowing them to favourably settle outstanding liabilities.

HMRC letters about the changes sent to users of EBTs gave a warning alongside a notification of the withdrawal of the settlement opportunity. It states:“You have a simple choice: settle with HMRC or be prepared to litigate."

Those who did not register their interest in settling by the end of March would "lose access to the beneficial terms” that are currently on offer, the letter says. For those who registered their interest, settlements had to be made by July 31.

Mr Murray has said that previous attempts to settle with HMRC fell on deaf ears.

The use of EBTs relate back to Sir David Murray's time in charge of the Ibrox club before he sold his controlling stake in the club to Mr Whyte for £1 in May 2011.

Rangers were subsequently forced into administration under Mr Whyte's control and placed into liquidation in February 2012.

A Charles Green-led Sevco consortium bought the liquidated assets of the club in June 2012 following the disastrous reign of Mr Whyte.

After the latest big tax case judgement, Rangers moved to say that it did not impact on the club.