England's top clubs could face large bills if Rangers lose 'Big Tax Case'

09 March 2017 09:53

Some of England's top clubs could face large tax demands if Rangers' administrators BDO fail to overturn their 2015 defeat in the so-called 'Big Tax Case' at the Supreme Court next week.

That Scottish Court of Sessions ruling was a reversal of two earlier tribunal hearings which cleared the club's use of employee benefit trusts (EBTs) between 2001 and 2010, a decision that gave Her Majesty's Revenue and Customs (HMRC) the chance to reclaim some of the £49million it claimed it was owed when Rangers went into administration in 2012.

The hearing in the UK's highest court takes place on March 15-16 and another HMRC win could see several other clubs that used the tax-avoidance vehicle being sent accelerated payment notices for income tax and interest.

Andy Wood, a director of Enterprise Tax Consultants, told Press Association Sport he has already helped one English club concerned about the Rangers case to reach a six-figure deal with the taxman over their EBT for a senior official. The Cheshire-based tax expert also said he was aware of "five or six" other private settlements.

Wood said: "The Rangers case has become known as 'the Big Tax Case' and that's not really an exaggeration because the issues involved have left many other clubs very worried about what the outcome might mean.

"They're not only concerned about the possible impact on their ability to attract, retain and reward the very best talent they can but the prospect of HMRC demanding large amounts in tax.

"In addition to the cases I am aware of in which clubs have made payment, I know of further instances in which clubs have received tax demands after disclosing their own use of EBTs.

"Although most of the immediate financial burden rests with clubs which have put these schemes in place, players who have taken loans from the trusts may not be spared as an imminent change in the law would require them to pay tax on monies not repaid by 2019.

"Being asked to stump up large sums may come as a shock for players, especially those in retirement who do not have the earning capacity they once might have had. Some might even be forced into bankruptcy."

Once popular with high earners in finance and football, EBTs enabled companies to circumvent income tax by paying money into trusts that would then be paid out to the beneficiaries of those trusts, the employees, in the form of loans.

HMRC finally tightened the rules around EBTs in 2010, ending Rangers' use of them and precipitating the financial crunch that saw the club thrown out of the Scottish Premier League and forced to rejoin the pyramid in the fourth tier.

Rangers versus HMRC was arguably the highest-profile example of a series of disputes between the national game and the public purse in the first decade of this century, with bitter and costly contests taking place at clubs such as Plymouth, Portsmouth and Sheffield Wednesday, too.

The advent of tighter financial rules in the game has improved matters but HMRC is still annoyed that football creditors get priority treatment in financial crises at clubs.

When asked to comment on Wood's claim it was making deals with clubs over unpaid EBT-related taxes, an HMRC spokesman told Press Association Sport: "HMRC does not do deals and we don't settle for less tax from EBTs than we would get from going to court.

"HMRC is committed to delivering a level playing field for all taxpayers, ensuring those who have used schemes don't derive any long-term advantage over those who play by the rules."

Source: PA