Her Majesty’s Revenue and Customs have won their long-running dispute over a tax avoidance scheme operated by Rangers Football Club.
The Supreme Court ruled in favour of HMRC as Lord Hodge announced a unanimous verdict as five judges dismissed the appeal by the liquidators of RFC2012, the company formerly known as Rangers Football Club before its financial collapse in 2012. Previously HMRC had lost two hearings over the Employee Benefit Trust scheme before finally ruling in their favour in the Court of Session in November 2015.
In excess of £47million was paid out to players, managers and directors at Ibrox between 2001 and 2010 in tax-free loans. It has since been argued by HMRC that these earnings were taxable.
Due to the fact that Rangers is now owned by a different company, it is highly unlikely to have any impact on the football club.
In a written judgment, the judges said: “The sums paid to the trustee of the Principal Trust for a footballer constituted the footballer’s earnings. The risk that the trustee might not set up a sub-trust or give a loan of the sub-trust funds to the footballer does not alter the nature of the payments made to the trustee of the Principal Trust. “The discretionary bonuses made available to RFC’s employees through the same trust mechanisms also fall within the tax charge as these were given in respect of the employee’s work. Payment to the Principal Trust should have been subject to deduction of income tax under the PAYE regulations.”
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