Andrew Smith: Not so easy to rewrite history of Rangers’ downfall

A report in The Times newspaper yesterday claimed that bungled calculations by Her Majesty’s Revenue and Customs were responsible for Rangers’ slide into liquidation in 2012. The report was novel in one respect – the arresting conclusion at which it arrived would appear, in itself, to depend on an unfortunate helping of bungled interpretation.

By ANDREW SMITH Thursday, 14th November 2019, 10:39 pm

Former Rangers chairman Sir David Murray. Picture: SNS

The contention in the piece has been seized on by those who want to blame everyone and anyone except those running Rangers for the club’s demise. Little wonder, when the report essentially promotes the notion that the liabilities arising from the club’s misuse of an Employee Benefits Trust scheme were so erroneously totted up that they scared off desirable suitors for the club at a time when owner Sir David Murray was being pressurised by Lloyds bank to sell. That pressure was such that eventually, in May 2011, he allowed Rangers to fall into the less-than-safe hands of Craig Whyte for the princely sum of £1.

Being generous, this supposition and the sums upon which it is based on contain more holes than a string vest. Being straight, they are utterly denuded of any credibility.

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The EBT scheme run by Rangers between 2001 and 2010, into which £47 million was funnelled for, most notably, salary payments to players, led to the so-called “big tax case”.

This resulted in a £74m claim from HMRC over the scheme which, ultimately, the Supreme Court adjudged in 2017 to have breached tax law.

Instead, The Times now claims the sum that Rangers’ liquidators BDO will have to set aside for HMRC’s claim from the big tax case when settling with creditors is likely to be around £20m.

The difference in the figures arises from a £24m penalty that HMRC claimed over the case now having been “taken off” – according to a report BDO compiled back in June – because it was “not applicable”.

Another £2m in related tax liabilities that The Times referred to as “overstated”.

Overstated might also be applied to the dots which the front page splash in the newspaper attempted to join with invisible ink.

BDO state in their report that the £26m out of the £74m bill is part of a £36m element within the overall total which relates to “interest and penalties”.

That leaves £38m for which the “Oldco” Rangers (in liquidation) would still appear to be liable.

Notably, there is no suggestion from BDO the interest on an £20m tax underpayment which resulted from the club’s EBT scheme is about to be wiped out.

Accountancy sources contacted yesterday suggested the interest would be in the region of £8m, and could see no reason why it would not still be sought by HMRC.

This puts the running total for Rangers’ liabilities arising from EBTs in the bracket of £28m. To this can be added the £2.8m owed from the “wee tax case”, a Discounted Options Scheme to reduce tax to certain players that Rangers quickly acknowledged failed to serve tax regulations.

It therefore follows that any party seeking to buy out Murray at Rangers in 2011 – a time when he was under pressure from Lloyds because his Murray International Holdings Limited (MIH) business, which owned the Ibrox club, was hemorrhaging millions – would have faced over £30m in liabilities to HMRC in the event of the tax case being lost.

That is all before adding the £18m bank debt Lloyds demanded was repaid in any sale of the Ibrox club.

The upshot, then, is that anyone interested in buying Rangers in 2011, before Whyte got his hands on the club (and failed to pay a tranche of further taxes), would have been set back £50m.

It is a matter of record that no buyer was interested in taking on such liabilities… before even thinking about the level of investment required in the football operation.

This information is indisputable because then Rangers chairman Alastair Johnston said so at the time.

In April 2011, Johnston sought to reveal publicly the gravity of the situation faced by the club as the big tax case hovered, the bank bore down and only Whyte wanted ownership.

As reported by Roddy Forsyth in The Telegraph, it wasn’t a £74m potential tax liability mooted as placing Rangers on the edge of the precipice but a lesser sum of £30m. Johnston said: “There’s a 10,000lb gorilla in the room and you don’t know what its appetite is.”

Johnston was quoted in the piece as saying in reference to the possible fall-out from the big tax case: “Even accessing all the resources we have access to, we couldn’t pay the bill.”

Forsyth’s article went on: “From which the only conclusion is that, if there is no Whyte knight and if faced with an adverse judgment in the main HMRC case – which could amount to as much as a £30m liability – Rangers would go bust after 139 years of existence.”

It should be noted that accountancy sources insisted that Rangers had been harshly dealt with by HMRC in their retrospective pursuit of tax resulting EBTs, which were widely used at the time.

However, they also confirmed that that the game was up for the club as they had debt allied to an unquantified tax liability which would take years to crystallise and therefore made Rangers unsellable. From that point, liquidation was always the likely outcome.

Not least, perhaps because it arrived for Murray’s MIH business in 2016 – almost a year before the Supreme Court’s final adjudication on Rangers’ misuse of EBTs.