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HMRC lodges appeal against Rangers tax ruling

HM Revenue and Customs has today begun the process of appealing against the tax tribunal ruling in favour of Rangers' use of Employee Benefit Trusts.

It said it had been granted leave to appeal and had submitted the necessary paperwork to continue its challenge against the Ibrox club's use of the EBT scheme from 2001 to 2010 to make £47.65m in payments to players and staff in the form of tax-free loans.

HMRC argued it was illegal, Rangers disputed this, and a First Tier Tax Tribunal ruled the scheme did not breach tax law. The case will now be heard at a Second Tier Tax Tribunal and, if not settled there, could be referred to the UK Supreme Court, which would take years.

The First Tier Tax Tribunal, before three judges, concluded in January, by a majority of two to one, that the EBT payments were loans, not earnings, and so were not liable for income tax.

A majority verdict was delivered that allowed the appeal in principle and declared that the assessments of HMRC be "reduced substantially". Two of the three judges decreed that only some of the payments made to players through EBTs were taxable but that many of them could be described as loans, as the club had argued.

They stated: "The majority view reflects the argument that the controversial monies received by the employees were not paid to them as their absolute entitlement. Thus the payments are loans, not earnings."

HMRC said at the time it was "disappointed" with the decision, and a spokesman said today: "We have lodged our appeal on the Rangers EBT case."

Rangers was under the control of Sir David Murray when it began using EBTs. He sold the club for £1 to Craig Whyte in 2011, while the tax liability was in dispute. The old club went into administration in February last year, owing up to £134 million to unsecured creditors.

The decision came too late to save "oldco" Rangers from being wound up and does not directly affect the current Ibrox regime.

The club was relaunched as a new corporate entity in June when the original company was consigned to liquidation.

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