The taxman today netted a huge victory in its long-running battle with Rangers Football Club, after the Supreme Court unanimously dismissed an appeal by liquidators BDO.
The dispute, over the tax treatment of payments to players and staff, contributed the club’s financial demise and subsequent relegation to the bottom tier of Scottish football in 2012.
Five judges ruled in favour of HM Revenue & Customs (HMRC), after BDO appealed a Court of Session decision in November 2015 over Employee Benefit Trust (EBT) schemes.
But the legal battle had been a game of two halves, with HMRC losing two earlier hearings.
Between 2001 and 2009 around £50m was paid to Rangers employees through EBTs. The club treated the payments as loans, whereas HMRC contended they were taxable earnings.
Today’s decision means HMRC will be entitled to a greater share in the pot collected by BDO, the liquidator of RFC2012. HMRC is already a creditor, but with today’s additional claims needing to be serviced payouts will have to stretch further and and each creditor will receive less proportionally.
However, last night it was dealt an embarrassing blow after being knocked out in a preliminary round of the Europa League by Luxembourg part-time team Progres Niederkorn.
HMRC director general of customer compliance David Richardson said the Supreme Court decision showed EBT schemes “simply do not work”.
This decision has wide-ranging implications for other avoidance cases and we encourage anyone who’s tried to avoid tax on their earnings to now agree with us the tax owed. HMRC will always challenge contrived arrangements that try to deliver tax advantages never intended by parliament.
BDO business restructuring partner James Stephen said the "significance of the matter" justified appealing the decision to the Supreme Court.
"We will now engage with HMRC on adjudicating its claim. Further advice and guidance will be provided to creditors in due course," he said.
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