Rangers Vs HMRC: Result could impact on city and Premier League

Saturday, 18 February 2012 10:48

The causes of Scottish football club Rangers’ financial problems and fall into administration could have significant implications for hundreds of other businesses who used similar employee benefit trust (EBT) schemes to pay staff.

Tax lawyers believe that hundreds of businesses including city institutions, banks and Premier League football clubs have used EBT’s, a tax planning mechanism that minimses income tax and national insurance bills by paying wages into offshore trusts.

EBTs were traditionally used as a way of making deferred payments to employees when future targets were met but in recent years have been more commonly used as a tax-efficient way of remunerating high-earning employees.

If Rangers are found liable following a challenge from the Inland Revenue it would pave the way for HMRC to challenge hundreds of other similar schemes potentially netting the exchequer up to £2 billion.

Tax lawyers believe that HMRC are conducting inquiries into around 300 schemes that use EBTs for payment to high earners.

Last year the revenue offered a nine-month grace period to allow those who received their pay via an EBT to come back into the mainstream tax system without any penalty but that period ended in the new year when EBTs were banned as a way of paying staff.

It is believed that no Premier League clubs use EBTs now but that some did around 2004, though the practice was never widespread.

The Inland Revenue has attempted to settle the Rangers employee benefit trust case by tribunal and Rangers has criticized the tax authorities for not coming to an agreement with the club.

The Inland Revenue says that Rangers owe £9m in payroll taxes and lawyers believe that by going into administration Rangers is attempting to put itself into an administrative position that will limit its liability to the Revenue.

HMRC says that it will engage with institutions that come forward with details of EBTs to settle by agreement but will take action through litigation against companies that do not come forward.

The result of the case between Rangers and HMRC will be watched eagerly in the city and if HMRC wins other institutions could find themselves facing litigation from the UK tax authorities.

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