A FORMER senior HM Revenue and Customs inspector believes his former employers made an error in using a 'grossing up' method to calculate a huge £74m Rangers' tax bill - that is being blamed for the club’s financial implosion.

BDO, the liquidator of the old Rangers business believes the taxman's calculations are wrong and if their challenge is successful would bring down its £94m tax claim to just £43m.

The taxman said around £74m was owed for the club’s use of EBTs from 2001 to 2010 to pay players and staff as part of the overall tax claim.

But if BDO's challenge is successful it could drop to just £23m - with  £24m penalties already wiped out by agreement and interest payments also cut.

Stephen Outhwaite, a former senior tax inspector specialising in investigation and regulatory issues said that 'grossing up' should not have been applied to staff and players and should only apply to directors if they are unable to make good the income tax paid by the company.


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Mr Outhwaite, now a tax dispute resolution expert said that under the Income Tax (Earnings and Pensions Act) of 2003 (ITEPA), while 'grossing up' is a common feature in many HMRC Employee Benefit Trust settlements, it is "not appropriate where the payments were to an employee or the director who has no material interest in the company".

In April 2010, HMRC began an investigation into Rangers’ use of EBTs to players from 2001 onwards.  

A total of 111 sub-trusts were said to have been set up between 2001-2010 for Rangers directors, players and other staff - along with employees of Murray International Holdings and its subsidiary companies.

A total of 53 Rangers players and staff received side contracts giving undertakings to fund their sub-trusts with cash.

Mr Outhwaite added: "Thinking about the Rangers case, then any payments made via EBT to non-directors should not fall within the Section 223 charge, and so 'grossing up' would be inappropriate in the case of the non-directors and if HMRC’s claim included grossing up for them it would have been incorrect."

Executives within the board overseen by owner Sir David Murray said confusion over the club's tax burden had deterred potential investors when the club was put up for sale in 2011, and ultimately culminated in the operating company's collapse under controversial businessman Craig Whyte - who had bought it in May 2011 for £1.


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Rangers went into administration in February 2012 over outstanding PAYE and national insurance payments, and subsequently entered liquidation in June 2012.

The amounts paid into the trust varied from a total of £6.3m received by Sir David Murray to £7,500 for Bellshill-born defender Steven Smith, who left the club in 2011.

The average amount received by Rangers and Murray Group employees was about £445,000.