On EBTs and Rangers – Part 3

A lot of people are interested in the decision of the Court of Session in Advocate General of Scotland v Murray Group Holdings and others. A lot of people.

On the 8th of April, at the height of the 2015 General Election campaign, Ed Balls appeared on the Today programme on Radio 4 to launch Labour’s proposal to ‘abolish’ (as he put it) the non-dom rule. The real question was whether that measure would cost money or raise money. He cited a post on this blog in which I argued that such a measure might well raise £1bn. It was the only evidence he had. I spent the whole day in media studios talking about that £1bn figure.

As I write, that post on the key question around one of the highest profile policies announced in the General Election campaign, a post which has been ‘up’ for over seven months, has been read 6,911 times. And a post about a tax decision of the Court of Session ‘On EBT and Rangers FC – Pt 1‘ has been read 14,246 times. And it’s been up for six days.

Why is that?


Clearly, what is perceived to be at stake is the reputation of the club.

Did it “cheat”, as Alex Thompson and others have argued? Did the club’s directors, by trying to reduce its tax bill, imperil its claim to past titles? Did the club do anything ‘wrong’?

I could offer some answers to those questions.

But my views would be ill-informed: I have not followed the story. To offer them would be crass: I know nothing of Glasgow or its football culture. And my expertise is as a tax lawyer: I’m not a moral philosopher.

But what strikes me is this.

You won’t find the answers to those questions in the decision of the Court of the Session. You won’t find them in whether the liquidators decide to appeal that decision. Nor in a decision of the Supreme Court. Not one that overturns the decision of the Court of Session; and not one that upholds it.

You find the moral quality of an action only in its actors. At what they did at the time and why they did it. The man or woman who drafted the tax code knows nothing of morality. The administrator of BDO cares nothing for football titles. The judges in the Supreme Court seek only to apply the law.

And whatever the directors of Rangers FC lost for its fans, and for Scottish football, when they embarked on an attempt to avoid tax won’t be regained by a legal decision that they succeeded in that attempt. And nor will it be lost afresh by a decision that they failed.

Put shortly, the conduct of Rangers’ directors won’t be bad if the liquidators decide not to appeal. And good if the Supreme Court overturns the decision of the Court of Session. It is what is, either way.


I have campaigned against tax avoidance at some professional cost to myself: you can read about that here.

And I have taken steps to expose the dishonesty of a small number of my colleagues at the tax bar. You can read about that here.

But I have also recognised that a climate in which tax avoidance goes unchecked – and the use of EBTs was then commonplace – can encourage avoidance amongst those who would not otherwise contemplate it.

And that there are circumstances in which even the best informed can find it impossible to ascertain the likely attitude of HMRC to a transaction they are contemplating.

You’ll all have your views on which side of the moral line the conduct of the directors of Rangers falls. It’s not for me to try and change your minds.

Enough for me to identify the right question. Which has got nothing to do with tax law.

Note: I discussed, on Sportsound, last night many of the issues raised by this post. You can listen to the podcast, for a period of time, here.

45 thoughts on “On EBTs and Rangers – Part 3

  1. Worth bearing in mind that the directors of any company have a fiduciary duty to maximize shareholder value. They have no such duty to the taxman. Indeed, minimizing the amount of tax paid is usually entirely consistent with maximizing value.

  2. Gently put. They certainly have no duty to minimise tax – and this case might illustrate one reason why.

  3. That’s more in tune with my personal thinking.

  4. “And a post about a tax decision of the Court of Session ‘On EBT and Rangers FC – Pt 1‘ has been read 14,246 times. And it’s been up for six days”. Why is that you ask?

    I am neither a tax expert or availed with a love of the beautiful game. I do hail from the west coast of Scotland. If the IP data of your blog visitors could reveal accents I believe the majority will share mine. “Football isn’t a matter of life and death. It’s much more important than that”.

  5. “But I have also recognised that a climate in which tax avoidance goes unchecked – and the use of EBTs was then commonplace – can encourage avoidance amongst those who would not otherwise contemplate it.

    And that there are circumstances in which even the best informed can find it impossible to ascertain the likely attitude of HMRC to a transaction they are contemplating.”

    Basically these paras seem to me to be at the centre of this blog — in an environment of multiple schemes and little institutional dissuasion, people (who might not otherwise have done so) could be encouraged to partake of “mitigation” and avoidance vehicles.

    Add into that a Governmental revenue-collecting agency that stands back for years with little commentary nor action on the issue, and it’s the perfect petri-dish for further culturing every sort of such scheme.

    As you say Jo, the morality of the matter isn’t really down to the Courts.
    But the problem is that it isn’t down to the baying mob either.
    I’m not quite sure who is entitled to be the judge of it tbh.

  6. Like all moral questions, ultimately the obligation independently to arbitrate is our own only. No one else can do it for us… unless you believe in the Pearly Gates.


  7. The reason Alex Thomson cries “cheat” and the reason the post about a tax decision of the Court of Session ‘On EBT and Rangers FC – Pt 1‘ has been read 14,246 times, have the same answer. It is about Rangers. However, there are far more people interested in Rangers than Rangers fans and some of it isn’t very healthy.
    Alex Thomson has been aware for some considerable time of the attention his sensational headlines with regard to Rangers bring to him and to his channel. There is no doubt that in the past Rangers (and specifically is previous directors) have brought some of these headlines on themselves but in casting doubt on the latest appeal you have somewhat opened a hornets nest for yourself. Rangers fans will pay testament to your impartiality. Celtic fans will now question everything you do and say. It has nothing to do with tax and nothing to do with morality. The comments in your blog testify to that already.
    I enjoyed your blogs, though for a layman even the simplification was a tough task. Good Luck!

  8. Jolyon Maugham , I bet you studied tax laws for years, did you not know that by googling a couple of paragraphs on tax laws, you can become an expert on the matter.Celtic fans do it all the time.😉

  9. I’d suggest the use of EBT’s period, in the context of a sporting environment is wrong on the issue of sporting integrity. It is the duty of governing bodies to protect its customers/fans from schemes that enable one member club or individual an advantage over the rest of the competition. Unfortunately the SFA & SPFL are deeply compromised by people connected with Rangers & indeed were beneficiaries of EBT’s. This must surely be a a conflict of interest, while proceedings have & still exist.

    I’d like to thank Jolyon for clarifying his opinion on this subject & I now hope the mainstream media in Scotland will without delay begin championing for an independent enquiry.

    Tax laws are tax laws & football laws are football laws & it’s now clear the former in the case of Rangers have been skewed to their advantage over the rest of our beautiful game.

    Change has to come or whats the point in continuing calling ourself a “sport”?

  10. Jolyon, the use of Employee Benefit Trusts first appeared. openly, in Rangers Accounts in 2001 yet it took HMRC until near the end of the decade before they presented Rangers with a tax bill inflated massively by penalties and back dated interest. Rangers, allegedly, offered to pay a lesser amount to settle at this stage.

    From your experience Is it normal practice for HMRC to ‘cultivate’ such schemes before retrospectively demanding payment and are all companies treated in such an aggressive fashion by the revenue.

    Had HMRC acted earlier, the scheme could have been discontinued in early stages, the low amount of tax then due could have been paid up (or contested at FTTT) and the business model easily adjusted to reflect the slightly higher cost, and (2) had HMRC actually done (1) they would have collected more money from the ongoing business year on year to 2010 when scheme discontinued and, particularly compared to now with the employee wage bill being some £15m less annually than some years ago.

  11. I think the moral question is very interesting and pertinent one but it has to be in conjuction with who actually benefited financially from the decision of Rangers to use EBT`s.The cost to buy the scheme added to the cost of the admistration of it both here and offshore amounted to circa 66% of the actual cost of paying the tax at the time.I wonder where the other 34% went.

  12. That’s a very fact sensitive series of questions and I don’t have facts. I am sure HMRC would not agree that they “cultivated” the schemes. And that it’s the taxpayers’ responsibility to get stuff right. On the basis of what I know those would both be fair points. But I have written here about what can happen if HMRC are slow to act – and I know that the Public Accounts Committee thinks (rightly, in my view, for what it’s worth) HMRC doesn’t monitor abuses of reliefs as closely as it should.

  13. The Companies Act 2006 replaced the common law duty to act in the best interests of the company with a new set of statutory duties. Arguably, the clear focus on shareholder value was replaced with one of “enlightened” shareholder value (lawyers can argue about how far the old case law influences the new statutory code).

    So, directors now have a duty to promote the success of the company for the benefit of its members (i.e. shareholders) as a whole, with due regard to the interests of employees, business relationships with suppliers, customers, etc, the community and the environment, and the company’s reputation (section 172 Companies Act 2006).

    There is no explicit duty to minimise tax, although as Charles says in most case reducing the incidence of tax will be consistent with a director’s duties.

  14. The legal question is whether the tax planning works or not – and indeed whether (after the company, perhaps somewhat surprisingly, persuaded the first two tribunals that the structuring worked) it is permissible for the Court of Session to in effect find new “apparent” or “self-evident” facts to support the ground of appeal on redirection (the appeal to “common sense” demonstrates that they were applying a policy argument to overcome the facts as found by the majority at the first-tier tribunal).

    On morality, one could say more about the professionals who devise and implement such planning but do not bear downside risk once their fees are paid. (Baxendale Walker was mentioned in the judgments.) But courts applying morality brings us back to the length of the Lord Chancellor’s foot.

  15. I am a Celtic supporter and I think the chap has done an excellent job in explaining very complex issues in a way in which most people can understand them. I’m certainly not going to question everything he says and does.

    With regards the specific issue regarding these EBTs I find it impossible to believe that having taken legal advice on the matter Rangers were unaware that these were intended to be used for discretionary payments. The person giving the advice would have explained that was central to the tax benefit.

    If a player or his agent then insisted of some sort of “side letter” (or contract) then they should simply have said the EBT option is not available to you. If however the player was willing to abide by the terms of the EBT, that payments into it were at the discretion of the employer and payments out at the discretion of the trustee then they could have gone ahead.

    If it is true that Rangers provided “side letters” and also used the EBT to make the payments then it was deliberate avoidance.

    I believe the Ramsay Principle deals with Mr Maugham’s argument with regard when the player got the money. In such an avoidance scheme the parts which serve no commercial purpose are are there only to assist in the avoidance are basically put to one side. The beneficiaries “got” the payment when they received control of it.

  16. Hi Gaz,

    Thanks for your comment.

    The Ramsay principle has been held by (now) three courts not to lead to the conclusion that the beneficiaries ever “got” the payment. It may well be right that the CS would have concluded otherwise – but it can’t because it was bound by the facts found by the FT.


  17. Every large company I have worked with has employed a tax strategy. In many cases that strategy was more conservative than that employed by the Murray Group. Nevertheless, the purpose of the strategy was generally to make the potential tax liability predictable and usually to take advantage of opportunities to reduce legally the overall burden. The only difference between a conservative strategy and an aggressive one is the level of risk that the tax jurisdiction in question will reject it and that rejection will be upheld by the courts. Given the prevalence of EBTs, Murray and Rangers may have felt that the risk was in an acceptable range.

  18. What gives you the idea that only Rangers were allowed to use EBT’s? They all were which means Rangers didn’t have an advantage.
    The other clubs weren’t clever enough to use them
    Rangers and Celtic were due probably to having better accountants.

  19. I really have difficulty when people start linking tax and morality. Does that mean that buying a bottle of duty free booze is an immoral act because I am avoiding tax? Does it mean that maximizing tax efficient pay,nets into my pension scheme is also immoral? Are higher rate tax payers more moral than others because they pay more tax? How many people pay more tax than they have to in the interests of morality?

  20. Hi Jolyon,

    I have read this blog with great interest so thank you for posting.

    Apologies if you have answered this question elsewhere previously but given the CoS decision that these payments were subject to PAYE and that it is the responsibility of the employer to deduct this tax, do you believe that HMRC will be able to pursue the players for the outstanding tax?

    Assuming of course that no further appeal is made to the Supreme Court

  21. Just a thought – if footballers or any other staff were recipients of payments through EBTs, for which in exchange they provided services, would this not then make them, as service providers or employees, statutorily bound to declare earnings as self-employed and then pay the required rate of tax? If a payment is agreed between employer and employee and is not bound upon tax obligations with respect to the employer, surely this then becomes a ‘fee’ and tax declaration applies? Sorry if this is way behind in the discussion.

  22. It was common ground that they were employees.

  23. As soon as I read the term “sporting integrity”, it was obvious what road this comment was going down.

    Where does it state (anywhere) that it is “the duty of governing bodies to protect its customers/fans from schemes that enable one member club or individual an advantage over the rest of the competition” ?
    The football bodies themselves provide such a financial advantage with prize money distribution — consistently rewarding those finishing at the top of a league, probably to the detriment of those at the bottom.

    As for ” … the SFA & SPFL are deeply compromised by people connected with Rangers” — good grief ! There are two Celtic men on the SPFL Board and the SFA includes men from Celtic, Hibs and Dundee United — hardly fans of Rangers FC.

    “Tax laws are tax laws & football laws are football laws & it’s now clear the former in the case of Rangers have been skewed to their advantage over the rest of our beautiful game.” — well … no.
    You’ve obviously not even been reading these blogs.

    However, it IS remarkable that whilst there are no precedents for claiming such “sporting advantage” through tax schemes be punished, the clamour rises for action to be taken on … what basis ?
    High Moral Outrage ??

    Tax avoidance has hardly been the worst moral outrage to occur in Scottish football, has it ?

  24. Where did I say “allowed”? The fact is Rangers failed to pay substantial monies to HMRC for 10 years. This practice should be unacceptable within sport as a whole. The fact that so many are arguing that it isn’t, is morally repugnant to all tax payers. Especially the ones (incl Rangers fans) who have ploughed thousands of pounds of their own taxable income into a sport where one club felt the need to gain an advantage. As SDM stated in his testimony, these players would not have been otherwise been obtainable. In other words you couldn’t afford them.

  25. So Bill, you don’t think the governing body of any sport has the duty to protect the integrity of it’s members? Maybe you should make your feelings known to the IAA?

    As for your other point – Please remind who it was & is in charge of licensing at the SFA? Also if you could remind us of what Campbell Olgilvie’s capacity was within The SFA & also if he enjoyed an EBT from Rangers?

    As for your last point on “Moral Outrage” you bet your bottom dollar we’re outraged & so should you be. Oh wait you already have! 😉

  26. Of course sporting governing bodies have a duty to protect their members … as laid down in their rules and regs. I believe that fans of Rangers FC have their own gripes about possible negligence to protect their club from a patently fraudulent takeover ?
    It’s football we refer to here — where in the SFA and/or SPL.SPFL rules and regs does it refer to punishing a member club because of moral dubiety over its tax arrangements ?

    Who was in charge of licensing at the SFA ? Was it just ONE man ? Was it ALL down to one single (ex-Rangers FC) man, who was able to ride roughshod over all the other SFA Board members ? It does seem unlikely, doesn’t it.

    “Moral outrage” is a fantastic baton to be wielded — it can be waved at tax avoidance schemes, it can be shown at illegal contracts from decades ago holding young players in thrall to clubs, it can refer to £1 land deals, or similarly dodgy land deals for training grounds, it can go towards film company tax avoidance schemes, it can go towards football clubs spending more than they can afford and having their debts written off (and thus not repaid), it can even frown down at soft loans paying an international player’s salary.
    And that’s just the money side.
    All of which (apart from the first) refer to other Scottish clubs.

    Where’s the “outrage” for all that ?
    Equally, where’s the outrage against Chelsea and Arsenal and Liverpool and Newcastle and the likes, all of whom gained advantages through using EBTs ?

    Seems strange that Rangers is singled out ?
    Or is it strange ? Is it something else ??

  27. I think you are being a tad naïve. Do you think there is a level playing field in sport especially football. Look at European competitions where some clubs benefit from lower domestic tax levels, have higher TV revenues etc. All clubs try to gain an advantage the option to use EBTs was open to all clubs. In using them it has turned out to be a disadvantage to Rangers as ultimately it has resulted in them losing about £15m worth of players, probably tens of millions of pounds in other lost revenue, serious damage to their reputation and given Celtic a free run at the title for four years. The consequences of using EBTs even if they appeal and win far out weigh the benefits.

  28. Yours is a selective morality based on the colour of your shirt – a fact your “SFA & SPFL are deeply compromised” quote makes only too clear.

  29. If an employee undertakes a contract of employment by an employer, and receives agreed remuneration from said party, then this can be no other, that I can see, than taxable earnings. Particularly if the agreed amount has been paid to the employee and their contracted period of work undertaken. If no steps have been taken to repay or redeem ‘loans’, (it being unthinkable that a footballer would work for no earnings in the first place), then surely this compounds the designation of moneys transacted between employer and employee as ‘earnings’, and therefore in common with the rest of society, taxable earnings. The plot takes some deviation however when club owner David Murray and Graeme Sounness, beyond his term as a Rangers player/manager, were both afforded generous sums through EBTs. I get that tax breaks of various kinds do exist, but am genuinely struggling to fathom how remuneration of Rangers players, or any other organisation involved in paying employees through an EBT scheme, if managed on a similar basis, can be legitimately exempt from taxation.

  30. Apologies, you are of course correct. The CoS stated that whilst they agreed with Dr Poon’s position that the Ramsay Principle applied they could not ” … adopt the whole of her reasoning”.

    I have to say they appear to have gone for the best of both Worlds there. They did not use the Ramsay Principle, however what they did appears to have had exactly the same effect.

  31. Please explain or indeed feel free to show us which football law Rangers have broken?
    and when you suggest people in the SFA and SPFL are compromised do you mean Peter Lawwell?

  32. Your argument in relation to Lower tax levels & higher tv revenues in other countries is irrelevant & are not in anyway comparable to not paying your tax liability. As for losing £15 million worth of players as you put it. This is a consequence of a different but connected issue (Craig Whyte) However it’s certainly not a punishment.

    Hindsight is wonderful & if SDM had known that one day this would all unravel then perhaps he wouldn’t have engaged in such a scheme. Although that is just pure speculation on my part & equally irrelevant.

    Agreed on the consequences outweighing the benefits. Do you believe that was the thinking of SDM at the time?

    No need to reply, as the answer is obvious.

  33. If the SFA can’t protect one of its clubs from being taken over fraudulently then why defend them?
    Clearly they are not fit for purpose & we as fans of all clubs should be doing all we can to expose them of at best incompetence & more likely corruption.

    The licensing & registration argument will only bring us to another can of worms, so I won’t address it on here. Just to say this was a massive part of LNS & must bring his findings into question.

    As for your implications in regards to other tax avoidance schemes? If clubs have engaged in these & are found guilty in a court of law then yes they should also be punished. However I think you’re clouding the argument as I believe all of the above clubs have paid their liabilities. HMRC at this time have not raised any actions in relation to any of them. Individuals perhaps but not the clubs themselves. Maybe that will change & others will also have to pay the consequences or maybe it won’t.

  34. As a Rangers fan Jolyon i welcome you into our world, although fortunately for you but for a brief period. where obsession about us from rivals is the norm. where all rules of innocent until proven guilty are suspended. Where morality is a one way street,,where no other football club carried debt, had loans, or indulged in tax avoidance schemes,.No just us no other club, of course a man of your intelligence will know that to be economical with the truth. Thank you for an impartial (that’s something you don’t often see in our world either) in this case, which i hope is kept ongoing by a further appeal.

  35. Taking court decisions out of the equation Rangers are guilty as sin

  36. I’m unsure as to who is defending the SFA on here ? It has to be repeated though that the considerable majority of people on the Boards of the two Scottish football authorities hail from clubs such as Celtic, Aberdeen, Dundee United and Hibs — none of which are supporters of Rangers FC.

    “Licensing and registration” ?? Dealt with comprehensively by the LNS judgement, and not a concern to the Scottish football authorities nor Rangers.

    The other clubs ?
    If clubs have used funds to operate above a level that they can repay, and then have had those debts written off (in other words, spent above their “correct” level and not repaid) — is there not a “moral” problem there ?
    If clubs have had assistance in capital costs in development projects (that others have not), is there not a “moral” problem there ?

    It’s worth mentioning that nowhere in the Court of Session Decision does it mention the terms: “cheat”, “guilty”, “illegal”, “fraud”, “improper”, “evade/evasion”, “dishonest”, “mislead”, nor “lie/falsehood”.
    It only mentions the term “advantage” once, when in relation to inheritance tax.

    The recent Decision did not find anybody “guilty” of anything — no crime has been committed and no law broken. It’s all there in black and white.
    Just like the Rules and Regulations of Scottish Football — which have no provisions for any punishments at all for this tax scheme.

  37. Jolyon,

    Throughout this saga there seems to have been a few versions of Acts that were relevant:
    – Income and Corporation Taxes Act 1988
    – Income Taxes Act 2003
    – Income Taxes Act 2011

    Have any of these Acts deemed the employment of EBT schemes as tax avoidance ?

  38. I would suggest that HMRC should not just “monitor abuses of reliefs” but rather be more active with intervention where necessary to prevent the continuation of such abuse. The DOTAS (and now POTAS) rules were designed as an early warning system to allow HMRC to take action and in this instance and many others, that has clearly not happened. There needs to a form of notice where HMRC can say “cease” to a promoter and/or a fast track for examples to go to a Tribunal to get an initial view on acceptability.

    The failure to act within any reasonable time exaggerates the effect of “bad” schemes and does lead users to think that HMRC is “cultivating” schemes in order to maximise revenue take. This is not something I personally think is true bit it is a comment I get from clients pretty much every day.

  39. Bill, the words you mention have been visible throughout this FTT process but I will take your word that they have not been used again in this latest decision. However the wording is only pertinent to the lawyers in finding reasons to appeal. As it stands at this moment, Rangers have been found guilty of tax avoidance. We know this as the liquidators will soon be receiving a hefty bill. By the way, it’s interesting to note the law lords did indeed make reference to Rangers “Old club” perhaps they misspoke?

    It’s good to know that you’re not defending the SFA. Which brings me to my original point.

    There needs to be an independent enquiry into all that has gone on here. Nobody gets a free pass, no matter what club they may be associated with or their alliegances. The SFA & SPFL have proven time & time again that they are not fit for purpose. Their actions have been deplorable in alll of this. Be it in relation to Rangers taken over fraudulently, 5way agreements or even the handling of LNS before the final court of session ruling was in.

    I am sure fans of all clubs want to get to the truth for different reasons & hopefully a truly independent enquiry will help. Do you not think its high time we clean up our game?

    Gosh knows Rangers fans must be sick of being kicked around from spiv to spiv? The people who allowed them to be their need to be exposed & removed. The very same people who have compromised the integrity of our game as a whole. This may cause additional pain but in the long run it will be worth it,. We can’t allow them to get away with it any longer. It’s time we took our game, as at least when all the dust settles. We will know our hard earned taxed income will be spent on watching a genuine fair & non corrupt contest. With both a strong Rangers (hopefully free of charlatans) & a thriving football league we can then all enjoy.

  40. Guilty of what exactly? and where else are you found guilty of anything other than a court of law? or do you think Rangers are guilty of something because some journalists say so?
    I think the point of this entire blog has passed you by – particularly part 3.

  41. My gosh, that was a lot of words.

    Firstly, you mention “throughout this FTT process” — I suspect you may not fully grasp that the FTT was part of the “process”.
    Nowhere in any of the Tribunal documentations have there been claims that Rangers were “guilty” of anything.

    Second, you state that “Rangers have been found guilty of tax avoidance” — again, perhaps you fail to grasp that you cannot be “guilty” of something which is not illegal.

    The recent Court of Session Decision makes no reference in any form at all to “old club” — I’m not quite sure why this is important ??

    The rest, about the SFA and enquiries and allegiances and fit-for-purpose — that’s not for a discussion on taxation.

    In black and white — Rangers weren’t guilty of breaking a law.
    Morality is a different issue — if clubs are to be punished for past indiscretions there may be worst instances of abuse to punish than in this case.

  42. Ok what about the directors?

  43. Dependent on the result of the Big Tax Case (years ?) the creditors pot of money gets shared out between secured creditors, unsecured creditors and shareholders.
    Dave king, in September, was told by BDO that he wouldn’t be seen as an unsecured creditor.
    Therefore his robust statement today [Nov 12th] must come from the view of a shareholder (of the OldCo).

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