On EBTs and Rangers FC – Part 1

A day or so ago, I gave an interview to BBC Radio Scotland.

For a while, at least, you can listen to that interview here (at about one hour and 36 minutes in). It’s not a particularly fluent interview – but it does have one merit. I express a clear view about the decision the Court of Session gave earlier this week in the Rangers case. I say that it was wrong. That’s my view at least and I’m a Queen’s Counsel specialising in the field of tax. Although that fact doesn’t make me right, it does make my view worth listening to.

After I gave that interview, I was asked whether I wanted to write about the Decision. My immediate reaction was that I didn’t. Analysing what cases mean – and whether they are rightly decided – is part of what I do for a living. What I do on this blog I do for other reasons.

But I hadn’t anticipated the level of interest in my views. And the need many Rangers fans have to understand what happened to their club. And the sense of loss that – or so from many hundreds of miles south it seems to me – many feel at having had part of their identity somehow taken away or diminished. And then I remembered that I had started writing this blog because I wanted to improve understanding of the field in which I work. And that the Rangers case was one where there was a huge demand for better understanding.

And so I changed my mind.

In a second I’ll tell you what I’ve decided to do. But before I say anything more, I need to tell you two things.

The first is that I don’t have any connection to Rangers or its equally proud rival, Celtic. I am not Scottish. I am not religious. And although I continue to follow Sunderland AFC – that being the team local to the pit village where my grandfather, Dennis, grew up – I can’t even decently pretend to be a serious football fan.

The second is that, as I point out here, I do work in many of the areas I cover in my blog. And I do work in the field of Employee Benefits Trusts. I think that the only difference this makes is that it gives me a good understanding of the area. I know I’m not the sort of person who would feed you a line because it was convenient to my clients for me to do so. I know that, as I’ve explained here, my record demonstrates that that’s not what I do. But none of that changes the fact that you’re entitled to know when you read what follows that I am doing some – not much but some – work in the field of Employee Benefit Trusts.


What I decided I would do is this.

I would write three pieces.

The first on why people use Employee Benefits Trusts; the second on why I think the Decision of the Court of Session is wrong and what happens next; and the third on what we can learn about the effects of tax avoidance from this sad tale.

And I would write them for those who most need them: the fans of Rangers. And because tax is difficult, I’d try and go slowly. I’d like the third piece to get more readers than the first – I think it will be the most interesting – and to do that I’d need not to lose readers along the way.

I haven’t followed the Rangers story especially closely – as I say, I don’t have any connection to the club – so please make allowances for that fact. I don’t think that will affect my ability to carry out the task I’ve set myself – but please bear it in mind if you think I’m getting something wrong.

If you’re a tax specialist you’ll also need to make allowances for the fact that this piece isn’t written for you. I make no apologies for not capturing in these posts the full technical detail around Employee Benefits Trusts.


To understand Employee Benefits Trusts you need to start by understanding income tax.

To acquire a liability to pay income tax two things need to happen: the first is that you need to “get” a sum of money and the second is that that sum of money needs to be “income”.

If you do “get” “income” you’ll have to pay income tax on it. And that income tax will reduce the amount of money you have available in your hand to spend.


I’m not going to write a long essay on what “income” is here. It’s enough for me to point out that the money that you get from the work you do as an employee is your income.

The interesting bit – for my purposes here at least – is around the “getting”.

Dennis’ wife, my grandmother Joan, had eight grandchildren. As each of us was born, she opened a new savings account and every week she paid money in. Not much: she didn’t work and although Dennis had not followed his brothers down the pit he wasn’t earning a fortune working as an electrician. But something: and as we turned 18 she handed the savings book over to us.

Before I turned 18, the money wasn’t mine. Even though she absolutely knew that she was going to give it to me – and I knew she was too because she’d told me she was saving money for me – it was still hers. But when I turned 18 and she gave me the savings book with the entries all written in in hand (I remember this because the adding up on the final entry was wrong and the handwritten notes showed a new balance rather higher than the amount Joan had paid in and I spent many happy hours wondering whether the bank might hand over that extra. Reader, I was disappointed) and I could take the money out and spend it or give it away… Then it was mine: I’d got it.


Employee Benefits Trusts are a bit like that savings account. They are a way that employers earmark money to pay to their employees in the future.

A lawyer will tell you that once the employer has paid the money into the Employee Benefits Trust it doesn’t belong to the employer anymore. But it doesn’t belong to the employee either. It belongs to the trustees who hold on to it until they decide who – which of the beneficiaries of the trust – they are going to give it to.

Accountants take a different view. When they draw up the employer’s accounts they ask who really owns the money. If the employer can use that money to meet its future obligation to pay its employees then they treat it just like Joan’s bank accounts. It’s one of the employer’s assets.

But if control over the money has already been passed over to the employee – if Joan has given me the savings book – then it’s treated just like a payment by the employer of wages. The employer can deduct that money from its income in calculating its profit.

And that’s rather good news for the employer. Because by making that deduction the employer gets to reduce the amount he or she has to pay to the tax man.


So the employer wants to hand control of the money over to the employee to reduce the employer’s tax bill.

But what about the employee?

He’d like to – she’d like to – have control of that money too. To spend it. But ideally without having to pay income tax on it. Ideally getting in his or her hand all of the money in the trust.

And because the employer benefits from keeping the employee happy – because a footballer employee who had less in his hand than he wants might otherwise decide he’s going to go play for another club – the employer has a good reason to help the employee get control of that money without having to pay tax on it.


So the magic of Employee Benefits Trusts from an employer’s point of view is that they enable the employer to reduce the amount of tax it has to pay to the taxman. And they enable the employer to keep his employees happy.

But only if they work.


52 thoughts on “On EBTs and Rangers FC – Part 1

  1. Fancy an instruction in a Supreme Court Appeal 🙂

  2. What about all these company’s like Amazon and Osbourne’s family Business that don’t pay corporation tax on their profits what is tax man doing about that

  3. A lucid and well written prognosis that even I managed to comprehend, well done Sir !

  4. Surely the relationship between you and your Grandmother is fundamentally different to that of employer and employee? No legal contract for services exist between you and your Grandmother but one does between an employer and employee. Isn’t this the common sense referred to in the judgement and provides the distinction between EBTs and other Trusts?

  5. There is that fundamental difference but – as you’ll see tomorrow – the analogy holds up on the critical point.

  6. As an accountant, the Court of Sessions ruling had a pleasing sense of substance over form…
    Do you think their interpretation of emoluments is wrong?

  7. Refreshing to read a breakdown and explanation of EBTs without the biased, frothing at the mouth pieces we, as Rangers fans, have had to put up with from people who know nothing about tax legislation. Looking forward to parts 2 and 3

  8. You’ll have to wait until tomorrow.

  9. Agreed. I think this is where the judges were absolutely correct – other than in specific situations, an employer directing money (or money’s worth) to somewhere as (part) payment for services certain smells like an emolument to me.

  10. That was a good read as always, Jolyon. Thanks for writing on this, we are very much looking forward to Parts 2 & 3.
    There are many other reasons why individuals found themselves involved with EBT-type structures (which I understand can’t be covered here)

    In the case of tens of thousands of contractors currently shelled with APNs , protecting themselves from the uncertainty introduced into their tax affairs by the IR35 legislation was a primary one.

    To this day, HMRC & the government pretend not to see the elephant in the room… despite them putting it there in the first place.

  11. No matter what the facts are, Celtic FC had friends in very high places within the Labour government who went out of their way to attack their rivals. The witch hunt of Rangers FC needs to be investigated thoroughly and those involved brought to justice.

    Every club in the English PL used EBT’s, yet Rangers FC are the only club to be dragged through the coals?


    Who is pushing this?

    Rangers FC didn’t hide these EBT’s, they showed up in the accounts year on year. The SFA knew this and never mentioned it to Rangers or said anything was untoward.

  12. Contractors have been declaring use of EBT structures since 2004, with NOT A WORD from HMRC except an initial “I’m going to look into your tax return and * will let you know if anything is not in order*” letter.).

    The next contact took the form of APNs landing on the doormat in 2015, after 10 years of silence !!! (see http://hmrc-APN.info/testimonies if you’re curious how this went for individuals)

    The reality is that HMRC was perfectly fine with these structures at the time (they actually, albeit involuntarily, spawned the whole industry into existence – cf. my comment above).

    Only when the Treasury started “needing money” did EBTs become the devil.

  13. The money your granny saved was post tax. Either she or her husband had already paid income tax on it, so when it was turned over to you (gifted) it did not incur income tax.

    The money Rangers deposited into the benefit trusts was pre tax. No tax had been ever paid on it. Fair enough, if they had first deducted PAYE and NICs and then saved it. But they didn’t. The deliberately went out to avoid paying tax so that they could offer higher payments (salary and bonuses) to their players.

  14. I look forward to parts two and three, but the basic premise of this article is I am afraid, misleading.

    All income is not the same and the law recognises this. The Court of Session judgement was looking at income from employment, which is obviously different from your granny giving you some savings.

    This not a technical issue that needs an overly complicated analysis or even a QC. Employment income is clearly defined in law.

    In the Rangers case the court found that money paid out by the club arose from their employment. They were being paid to play. This is an obvious conclusion and one I think no one could find difficulty with.

    The fact that the money is then put in a savings account rather than their current account is irrelevant.

    This, as the court said is just common sense, but there is an additional reason why this must be the case also.

    The club didn’t just put the money into a trust for the players because they felt like that was the right thing to do. The players didnt just see loans appearing in their account from an offshore trust and think, wow, how nice that Rangers decided to save some money and give it to a trust who decided to loan some of that to me at exceptionally good rates.

    The players signed an agreement with the club setting up that scheme. The payments to the trust, and how they ended up in the hands of the players was all pre planned. It was, tax planning.

    In short the players asked the club to put the money in a savings account rather than their current account. Again this is obviously very different from your Gran deciding to save some money for you when you are born, something which you had no choice over. The point about direction of funds was fundamental to the case made by HMRC, and it was a point they only introduced at appeal stage and not considered by the previous tax tribunals.

    The court’s decision says that if your employer (not your gran) decides to pay money in exchange for your work, the fact that you ask them to put that money in a long term savings account rather than your current account is completely irrelevant.

    It isnt magic, but in my view it must be the correct decision.

  15. Thoroughly interesting read , & I look forward to parts 2& especially 3. I’d also 100% like to thank Thomas on mentioning the witch hunt against Rangers FC . This is where it all began. Lloyds bank demanded an £18m loan be paid back in full in the immediate aftermath of the tax ROMOUR, let’s face it , Rangers were punished by the footballing powers by a ROMOUR which has yet to be proven. & just out of interest to readers, the man st the top of Lloyds who demanded £18m from Rangers,,, none other than a McKenzie , the same Rod Mckenzie whom at the same time was a member of ,, wait for it ,,, the Celtic trust. Tick tock! Justice is coming your way !!

  16. Good piece of common sense.
    At the time Murray thought all legal and until appeal over it still could have been

  17. Most of the EBTs I came across in England involved shares rather than money (which is why they were disclosed in the accounts). Why did they include the EBTs in the accounts if was just about money?

  18. Staggering that the media don’t want to pick this up. Even an English based investigative journalist could make a name for themselves if they had the appetite. It will all come out in the wash as they say – unfortunately some of the damage will be irreparable by then.

  19. JM,

    The term ‘illegal’ has been banded about over the past few days yet there is no mention in the Judges decision of that particular word. So, back to basics:

    – are EBTs [nowadays] ‘illegal’ ?
    – were EBTs ‘illegal’ ?
    – when and where do EBTs actually become ‘illegal’ (i.e. non-payment of tax on them) ?

  20. I’m not aware of any suggestion that these EBTs were illegal.

    They involved an attempt – successful or not we don’t yet know – to avoid tax (which is legal) rather than evasion (which is “illegal” although describing it as “criminal” might be a more apt way of putting it).


  21. Hi George,

    Thanks for your comment.

    You might want to read my blog again. But the analogy with my grandmother’s saving account is all about explaining the “getting” question. It’s not about explaining the “income” question. So to say it’s flawed as an analogy of the income question is somewhat to miss the point.


  22. You might want to read my blog again. The analogy with my grandmother’s saving account is all about explaining the “getting” question. It’s not about explaining the “income” question. So to say it’s flawed as an analogy of the income question is somewhat to miss the point.

  23. A very good read, my only wish as a rangers fan is that there were more people like yourself coming out in the media and getting points like this across. I am also unsure if BDO will appeal the recent verdict, which we all know they should, but get the feeling that it isn’t really worth their time. The whole point of this from HMRCs point of view is so that they can go after clubs down south that’s the bottom line here. But a great read that I will certainly be sharing around my fellow supporters.

  24. Jolyon,

    That’s what i got from reading the judges opinions – that HMRC’s appeal in regards to the EBT becoming liable for tax was successful on this occasion due to the Judges favouring the argument of re-direction of earnings.

    The appeal process, however, doesn’t seem to have been exhausted in this case, but that would be dependent on BDO.
    The desire for any of the five named respondents to appeal further may be exhausted though.

  25. Thank you for a very well explained article I look forward to the others. From a Rangers supporter.

  26. The reservation of the question of expenses, noted in the final sentence of the Judges conclusions…….a sign of a further appeal ?

  27. I don’t think there is much “investigative journalism” left in England…

  28. Looking forward to parts 2/3. Explanation on workings of EBT’s simply brilliantly put to the reader.

  29. But surely that is precisely the point. The Court of Session case is about the application of PAYE legislation.

    PAYE is of course applied to employment income before it is received by an employee.

    The finding of the court is that the employer had an obligation to deduct tax payments from the employment earnings it was paying out, before the employee got them.

    In that context I simply don’t get how the getting issue, or how the player received that money is relevant to the question before the court.

    I suppose you might say that the employer hasn’t made a payment to the employee until the employee receives it, but that is where the issue about the side issue comes in.

    If the player asks his employer to send the money to a third party then that is the employers obligation disposed of and they have made the payment in the way which has been agreed by the employee.

    Indeed that is precisely the attack the Court of Session made on the Tax Tribunal’s findings, who tried to separate the concept of the disposal of an obligation from employment earnings. The Court rightly said that the disposal of an obligation is employment income if that obligation arises from work done by the employee.

    As far as the employer is concerned the payment has been made and they should withhold tax under PAYE.

  30. You’re rather anticipating what I’m going to say about why I think the decision is wrong. Some might think – not me of course, but some – that it would be sensible to wait until you’ve heard what I have to say before you tell me that I’m wrong?

  31. As a Rangers fan I appreciate reading your thoughts on this and it gives me some hope that justice might be done if appealed

  32. Jean, you are so correct his grandmother chose to dispose of her earned tax paid income by gifting to her family as is her right, she could have spent it in the pub also another choice available to her. Rangers payed their players for work carried out as their employees there for it was always subject to income tax and national insurance. To suggest otherwise is lawfully and MORALLY wrong.

  33. Thank you for this article. It has helped give a better understanding of the case. I look forward to the next part.

  34. As a Rangers fan (and an accountant) it is a breath of fresh air to listen to and to read the views of an impartial individual with years of knowledge in this area. Looking forward to parts 2 and 3. People like George sum up events to date in this area – lets jump to massive conclusions before we have heard any of the detail. Typical.

  35. As I said that the beginning of the comment, I look forward to tomorrow’s post, and am intrigued to see what your attack on the very clear and plainly reasoned judgement of the court will be.

    Not that I think that appeal court judges have a monopoly on being right. See http://www.thebattleforwaterloo.org/court-of-appeal-judgement/

    But anyway, I just think the example you used wasn’t quite appropriate- a little bit like Osborne and Cameron constantly comparing the governments budget deficit to a family budget. They arnt equivalent.

    It might have been better to say that your local newsagent in Sunderland offered to put part of your payment for doing a paper round in a jersey trust.

  36. Whether legal (or criminal) at the time or not, sounds like the preface for a wonderfully sophisticated tax dodge. Looking forward to parts 2 and 3. I’m assuming Gran didn’t contract you for services that would assist her to accrue vast revenues through television deals and participation in major sporting competitions. I’m assuming too that she didn’t hand you your Savings book and say it was a loan you needn’t pay back, but I guess this is to miss the point, so I’ll wait for 2 & 3.

  37. is there not some issue of side letters given to the recipients,which makes the payments into trust contractual? and therefore emoluments

  38. Wrong, Rangers never declared these payments, it was all agreed in side letter that were never declared to the sfa, that’s why they were guilty of cheating, all payments must be declared in the written contracts signed by both parties and lodged with the governing body.

  39. If you are correct, and an employer is quite within their rights to use this practice to pay employees. Is it also your view that a company/club can also pay an EBT to someone who is no longer employed by them, and hasn’t been for 10 years, as was the case when Graeme Souness as given £30,000?

  40. You are wrong my friend.

    Rangers put every penny paid into the EBT scheme in their accounts which had to be signed off by the SFA. So it WAS declared.

    The so-called “side letter” wasn’t disclosed to the SFA because as far as Rangers were concerned the payments were loans and there was no need to disclose them, otherwise HMRC would have been on the case, which they weren’t up until we won 3 in a row with no dough 😉 Funny that eh?

    Was Juninho’s EBT in Celtic’s accounts or declared to the SFA? I think you’ll find the answer is A BIG FAT NO!

  41. Very interesting read Jolyon. It is refreshing to get a professional unbiased standpoint, on a case that has attracted many public house tax experts. Looking forward to parts 2 and 3.

  42. While I have no wish to preempt parts two and three, I would like to challenge the notion, suggested by a number of the comments, that income is necessarily taxable. Most tax jurisdictions offer opportunities to redirect income to tax free or tax deferred vehicles; payments into qualified pension funds is the obvious one.

    As such, properly constituted payments into an EBT may very well be legal (that is likely to be decided by the Supreme Court) irrespective of morality or common sense. What matters is the law and not either of these two values.

    For the record, I am not and never have been a ‘tax guy’. But I have never found tax hard to understand. The problem is that most people come to tax with limited knowledge but with pre-conceived ideas on who should be paying it (usually not them) and how much they should be paying.

  43. I do most certainly agree with your parentheses 🙂

  44. It belongs to the trustees who hold on to it until they decide who – which of the beneficiaries of the trust – they are going to give it to.

    True,unless of course the employer provides a letter of indemity,which guarantees the player his payment,which david murray was kind enough to do on scores of occassions.Which means the money did not belong to the trustees but to the employee and the trustees had no choice but to give them the money because if they did’nt then rangers would have been in breach of the players contract/signed guarantee and may have decided to take their services elsewhere.


  45. The footballers mostly had side letters, but the executives in the other companies in the Murray Group didn’t. The judgement makes no distinction between the two different groups.

  46. Oh please, are we really supposed to believe that other fooball clubs used EBTs and were just ‘let off’? No; the truth is Rangers FC could have conceded the case when first challenged, as others surely did. Then there would have been no coals to haul the club over.
    The reader will gain more from this if he, perhaps for once, sets aside his theories about conspiracies that go right to Downing Street.

  47. Pingback: On EBTs and Rangers FC – Part 2 | Waiting for Godot

  48. Quite interesting read . Most Rangers fans even with their comments are just looking for an explanation. It seems you are trying to explain this .Thanks for that
    Sadly with most Celtic fans and haters of Rangers . They are tripping over themselves with their new found knowledge and interest of tax benefit trusts or maybe that’s only because it involves a certain club.
    Justice will hopefully prevail in the fullness of time and the witch hunt which sadly exists in this pathetic little backwater of a Country gets a mention

  49. Just to be clear I am absolutely not endorsing your comments about Celtic fans or Scotland. But you are right that I am just trying to explain.

  50. Hahaha can you read? Hen this is obviously a bit complicated for you. EBTs were a LEGAL TAX AVOIDANCE SCHEME being used by over 5000 companies in this Country. It means it’s aa legal way a company AVOIDS paying Tax and National Insurance payments. Keep up hen. HMRC LOST 2 appeals which mean other tax experts in the tribunal appeals agreed that the scheme is legal and this TAX Expert Queens Council {Barrister} who has years experience in this field is pointing out this appeal was wrongly Judged in his opinion. But don’t let facts get in the way of your ramblings. 😂😂

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