The case for the defence of Rangers based on the tax tribunal

Ibrox Stadium
The SPL alleges that Rangers failed to declare payments made to players to the league.© SNS Group

In early 2013, an independent commission will hear evidence on whether Rangers breached the rules of the Scottish Premier League between 2000 and 2011.

The practice of giving players payments through a mechanism known as Employee Benefit Trusts is under scrutiny, with the league alleging they were not declared to them.

Rangers, in tribunal evidence, believe it was not necessary under the rules to declare the payments, which they consider to be loans and not compensation for playing football.

Taking the evidence given by Rangers employees, Murray Group Limited and HM Revenue and Customs at the First Tier Tax Tribunal, as well as the opinions of the three-person panel, it is possible to piece together where the case for the defence may lie.

This article is not intended to serve as a definitive outlook of how Rangers’ defence will be presented when the commission sits in early 2013.

It is intended instead to highlight what has been stated at the tribunal which is relevant to the SPL case, and using the statements given to outline how the case for the defence may be built.

This article has two accompanying pieces. The first, Rangers tax case: Your questions answered on the SPL investigation, and the second, The case against Rangers based on the tax tribunal documents.


What was said about the premise of EBT payments in favour of Rangers?

Early in the evidence given to the tribunal, "Mr Red", described as a senior member of the tax function at Murray Group Holdings, stated it was "his view [side-letters did not] have to be disclosed as part of the player’s remuneration package to the football authorities. It was not a financial entitlement, he insisted, nor did it represent, in his view, a payment to a player."

"Mr Grey", a solicitor specialising "in football agency work and sports law: but, by his own admission, not holding expertise in "tax treatment of benefits received from remuneration trusts", agreed.

It is stated: "Mr Grey confirmed that the Scottish Football Association requires disclosure of the terms of a footballer’s contract but that does not extend, as he understands, to payments from a remuneration trust.

"While payments from the player’s club must be disclosed, including benefits in kind such as cars and accommodation, benefits from third parties, such as a sports company, need not. However, there is no formal SFA ruling in respect of remuneration trust benefits."

What about “side-letters”?

Mr Grey, the solicitor specialising in football agency work, was involved in the negotiation of Mr Purple’s playing contract with Rangers.

It is stated that "the concluding offer by Rangers was of two elements, half in salary and half in benefit form from the remuneration trust. The contract providing for the salary and a separate document, referred to as a 'side-letter', bore the same date."

It is then stated: "Mr Grey did not consider that the terms of the 'side-letter' required to be disclosed to the SFA. It did not represent a benefit from the Club. There could only be a 'recommendation' by the club to the trustees."

Do the club say side letters were part of contract?

Mr Magenta is described as having worked on football administration matters at the club. He was questioned closely about “side-letters” and benefits payable in terms of these. “Side-letters”, he said, were part of the “package” offered to players but were distinct from the player’s contract.

"The ‘side-letters’, Mr Magenta insisted, did not have to be disclosed to the football authorities. The SFA rules did not extend to payments from third parties, and this, in accordance with an earlier decision by the Club, would include any trust benefits as being distinct from payments in terms of the player’s contract.”

What “facts” did the tribunal decide based on the evidence given?

It is detailed in the “findings of fact” by the tribunal after hearing the evidence that “in the case of certain footballers the terms of engagement were commonly recorded in two documents, one being a contract of employment, the other being described as a side-letter.

“The latter would provide ordinarily for the constitution of a sub-trust in name of the footballer. While the SFA required players’ contracts to be registered with it, Rangers did not consider it appropriate to have side-letters registered.”

What was the tribunal’s view on 'side-letters'?

The majority view of the three-person tribunal concluded that “we consider that the side-letter’s obligation does not amount to an emolument [payment for employment]. Again, it falls within the description of ‘a discharge of an employer’s obligation to an employee’.”

This statement is important as the SPL rule states that wrongdoing has occurred only if payments for playing activities have not been disclosed. It is likely to be argued, therefore, that the conclusion given means EBT payments do not fall within this category.

What is the club's likely defence?

Rangers’ defence is likely to be that the EBTs were loans which were not part of a footballer's contracts, were not payments for playing football, and therefore did not need to be declared to the SPL.

Now read Rangers tax case: Your questions answered on the SPL investigation, and The case against Rangers based on the tax tribunal documents.

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