Rangers FC, the Scottish Premier League club, have been placed into liquidation by HM Revenue & Customs.
The club owes HMRC as much as £20 million in potentially unpaid taxes and a further £75 million in respect of potential liabilities as a result of the use of its Employee Benefit Trust (EBT), and an employee share option scheme.
There had been talks to rescue the club earlier this year and a number of potential saviours came forward. One such consortium proposed a proposed a company voluntary agreement (CVA) with creditors, which would include HMRC as an normal unsecured creditor.
HMRC placed the club into administration in February this year, and now has decided to reject the CVA and has applied to liquidate the club – Creditors Voluntary Liquidation (CVL). This will allow the liquidators to consider and possibly investigate the actions of the directors in the management of the club.
Clearly HMRC must believe that in pursuing the the club and potentially the directors/owners that it can get a better deal!
The details of the EBT have been strewn across the pages of many a website, journal and paper. So in order not to bore anyone further, I will not go into the mechanics of EBTs. It would appear that the reason the EBT’s integrity has been called into question is that the club gave certain players a written assurance that the loans advanced to them by the EBT would not be repayable. If it isn’t a loan, it must be earnings of some kind and that comes with a tax liability – PAYE and National Insurance. Let’s not forget that on top of this, there are interest and penalties of up to 100% that HMRC will also seek.
The share options scheme was worth less but nonetheless has become an issue. It seems share options were granted to players by offshore companies after the companies had received substantial funds. On exercise of the options, the players became the shareholders of their very own cash rich offshore company. Perhaps this is an over-simplification of the facts but hopefully you get the idea.
All this was under the scrutiny of a tribunal and it was long-published that a decision was due shortly after Easter this year, but it has been eerily quiet on this front.
So what of the footballing side of things?
The players and staff have suffered a 75% wage cut to help out the cash-strapped club but this isn’t going to last. I can only see the players that can securing contracts elsewhere and leaving the club. This is going to affect the on-field performances as adequate replacements will be hard to come by.
The club may well be sanctioned by the Scottish Premier League, or even receive a ban from playing in Europe, which will hurt financially.
There has been an invstigation into the club by the Scottish Football Association into alleged irregularities in player reghistrations.
The liquidation itself also throws up a number of uncertainties. There may be sanctions – fines, operating restrictions and possibly relegation from the Scottish FA. There is also the uncertainty that any rescue package will be able to buy the assets out of liquidation intact.
It’s hard to see how the club can get through these challenges intact and in the Scottish Premier League. Perhaps it will need to start at the bottom of the Scottish league structure and work its back up the pyramid, much like AFC Wimbledon did (although for other reasons!) but that’s going to be hard for the fans to take, especially given that this club is such an important part of Scottish football and culture.
The case continues…
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