RANGERS have lost more than £3 million over an unpaid tax bill that owner Craig Whyte had contested.

The development comes as Pritchard Stockbrokers, an investment management firm Mr Whyte helped administer, was yesterday forced to halt operations by the Financial Services Authority after it misused clients' money.

The Rangers tax money was arrested in September following an application by Her Majesty's Revenue and Customs (HMRC). The club's bank acted by putting the money into a holding account.

It was to be held to give Rangers the right of appeal, but The Herald understands that, despite initial protests from the club, there was no official contest.

It is now understood Rangers did not appeal the arrestment, and the money has now been claimed by the taxman.

Rangers confirmed last night the money has gone to HMRC.

The sum, understood to include a late payment penalty, stemmed from liabilities run up on deals during the high-spending reign of former manager Dick Advocaat, which were only identified in the later due diligence stages of the takeover by Mr Whyte in May last year.

When news of the arrestment, which was initially £2.8m, came in September last year, the Ibrox club said it would be making a complaint to the HMRC over the "constant leaking and briefing around this matter".

The club had previously threatened legal action over its claims that details of the club's affairs had been leaked by HMRC.

It said at the time: "Enough is enough. We are sick of every part of any negotiation with HMRC being played out in public, accurately or inaccurately."

Rangers were issued with a last warning to settle the bill before tax officials visited Ibrox and the club's training ground, Murray Park, in September.

Club sources said at the time the HMRC documentation revealed the next steps if the penalty was not paid, such as identification of assets, but insisted Rangers was still disputing the sum.

Rangers said at the time: "Some of the money has been paid but this goes back 12 years, long before the current regime, and [the club is] challenging the basis of it."

If Rangers had objected to the seizing of the funds and it was upheld, a sheriff could have ordered that the arrest was restricted, meaning only part of the funds were handed over or recalled.

However, as there was no formal objection the arrested money went automatically to the HMRC, sources have revealed.

Rangers are also awaiting the result of a more serious £49m tax case with HM Revenue and Customs in relation to the club's use of employee remuneration trusts up to a decade ago.

Meanwhile, it has emerged that Pritchard Stockbrokers, based in Bournemouth, of which Mr Whyte is company secretary, has been effectively told to halt its investment activities over alleged breaches in client asset handling at the firm, including use of client funds in its own accounts.

The Financial Services Authority said the breaches mean that Pritchard can only close transactions it had already started and that its assets had effectively been frozen.

The regulator said it had come to this decision as it had "serious concerns", specifically that Pritchard has failed to arrange "adequate protection" for clients' assets when it was responsible for them.

The regulator also said it believes that Pritchard may have allowed client money to be used in its own account "to meet its own expenses".

The FSA has told the firm that it cannot release any of the assets in its account, or any assets belonging to its customers, without its written consent.

Pritchard have until March 15 to make make representations over the supervisory notice.

A Rangers spokeswoman said of the Pritchard Stockbrokers' development: "This does not relate to Rangers Football Club."