Court hears HMRC’s appeal on Rangers “Big Tax” ruling

The UK taxman’s appeal over the original decision in the so-called Rangers “big tax case” has begun being heard by three senior judges.

The HMRC’s original case against the club had claimed that payments to players and officials had been made through sub-trusts in order to avoid the payment of income tax.

However, a 2012 tribunal ruled that the club’s use of the ‘Employee Benefit Trusts’, which provided tax-free loans, was not illegal.

But launching their fresh bid to have the ruling overturned, lawyers acting for HMRC told the court that to uphold the original decision was to endorse a “fantastically silly proposition”.

The use of employee benefit trusts relates to when Sir David Murray was in charge of the Ibrox club.

The club has since changed owner ownership and subsequently been forced into administration while under Craig Whyte’s control and then later went into liquidation.

The current legal challenge concerns Sir David Murray’s company which ran Rangers until 2012.

HM Revenue and Customs maintains that the effect of previous tribunal decisions in the case is that employees can avoid paying income tax by agreeing that payments be made to others of their choosing, rather than getting the money themselves.

Their lawyer, Julian Ghosh QC, told the court: “When money is paid for something you did it is also derived by the earner, the worker.

“This cash payment was part of the remuneration package. It was wages and bonuses. This money was earned for work done.”

He said so far as the players were concerned it was for appearing in football matches and winning games and for the executives for work performed.

In July 2014, an upper tribunal dismissed an HMRC appeal against a first-tier decision on payments made to players and other employees, although it did send some aspects of the case back to the first tier tribunal.

The Revenue is arguing that both a first tier tribunal and the upper tribunal, chaired by Lord Doherty, erred in the case.

Its appeal argues: “The scheme in this case was established in terms that had effect so that, on appointment of the funds to the individual sub-trusts, the sums in question were ‘paid’ to the employee.”

The appeal at the Court of Session in Edinburgh before the Lord Justice Clerk, Lord Carloway, sitting with Lord Menzies and Lord Drummond Young is set down to last four days.