A few weeks ago I spoke with Rangers chief executive Martin Bain. He kindly took my call on a Saturday morning just after his lad’s football match. I told him that I was a freelance journalist commissioned to do a story for the News of the World. After exchanging some jokes about the perils of being, as I termed it, “a maddie at your boy’s fitba match” I had to tell Martin Bain some bad news.
I informed him that this journalist already knew that Rangers had received a bill from the taxman for £24 million and that interest of £12million had been nailed onto that amount.
Over the previous two weeks the News of the World had firstly broken the story that all SPL clubs were being investigated by Her Majesty’s Revenue and Customs (HMRC) as part of an ongoing tax probe. The real story, however, was revealed the following Sunday in that the old firm, conjoined twins in so many areas, had very different tax policies.
For the last decade, Rangers had been making a systematic use of Employee Benefit Trusts (EBTs).
Celtic looked at this method of being “tax efficient” in 2006, but Celtic Chairman, ex of the Bank of England, Brian Quinn thought better of it.
Initially Martin Bain said to me that, effectively, the tax issue belonged to the parent company of Rangers; Murray International Holdings (MIH).
He told me that there was no tax bill at Rangers.
After going round the houses with Martin Bain on the phone we nailed down that there had been “an assessment” delivered by HMRC to Rangers FC. Most people would call that a bill.
The “assessment” formally becomes a bill when the tribunal system is exhausted, the amount on the “assessment” then “crystallises”.
That is when the money is due to be paid.
The tax authorities have sent a bit of paper to Rangers and that piece of paper has a number on it.
That amount is £24 million + £12million interest.
That £36 million is greater than the club’s well publicised bank debt.
After my interview with Bain the story was out there and perhaps because of this the club Chairman Alistair Johnston went public and clarified the position on the tax probe.
The Ohio based businessman confirmed that the assessment from HMRC was indeed “ a Rangers issue, but it is being masterminded by the Murray Group’s financial and legal advisors,” said Johnston.
The only question to be answered was what tax penalty would be imposed on Rangers by HMRC should they lose the case?
What has not been previously revealed is that Rangers football club have already been served with a tax penalty of £15 million by HMRC for their sustained use of “Employee Benefit Trusts” (EBT) to players and other senior employees.
This brings the total confirmed amount that HMRC are seeking from Rangers to £51 million.
This £51 million bill has yet to “crystallise”, i.e the tax tribunal due process has yet to reach its conclusion.
Rangers can drag out this process by using all the appeals available to them.
However this will incur huge legal bills should they decide to do this.
The figure of £15 million for the penalty is an indication of the seriousness with which HMRC view this case and their determination to see it through to a successful conclusion.
The recent press interest investigation has clearly rattled the Scottish Premier League champions with the club’s chief executive refusing to answer whether or not Rangers had ignored expert tax advice to abandon their tax strategy?
I also put the following question to Martin Bain:
- “Did Sir David Murray or other Rangers executives benefit from this scheme?”
Bain confirmed that “employees of the trust” were paid through the EBT.
I asked him if that included people at the club other than players.
He confirmed that it was not just players.
I then asked him if he had been paid through the EBT.
“That’s a matter for the tax office and my own personal contract so I’d rather not go into that.”
Of course a simple denial would have killed that particular part of the story.
When I put it to Bain that his answer was in fact a “no comment” he didn’t disagree with my characterisation of his answer.
Here is what has been confirmed at this time:
- Rangers have confirmed that there is a tax probe
- Rangers have used EBTs. This will have helped millionaire players pay lower tax rates than most Rangers’ fans.
- Chief Executive ‘Martin Bain has confirmed to this journalist that the bill for core amount has been received.
Initially Bain told this journalist that the EBT was a matter for parent company Murray International Holdings (MIH). However, after the article was published chairman Alistair Johnston confirmed that the HMRC issue was, indeed, a matter for Rangers.
“It is a Rangers issue, but it is being masterminded by the Murray Group’s financial and legal advisors,” revealed Johnston.
When I interviewed Martin Bain he suggested that I speak to MIH financial director Mike McGill.
I called McGill on the Monday after I had spoken to Bain. I spoke briefly with McGill. He told me that he had read the NOTW story and, subsequently, refused to speak to me.
The day after I spoke to the MIH financial director I received further news that shocked me.
What moves this story on is the following information.
I did not know at the time of my interview with Martin Bain that Rangers had already been served with the tax penalty.
The amount of that penalty is £15 million.
Therefore the full amount that Rangers will be due, should they lose this case against HMRC, will be £51 million.
It is clear that those in charge of Rangers did not wish this story to break.
Since I started writing on Rangers taxing problems the club’s public comments have confirmed my journalism to be accurate.
The initial stories were met with disbelief from both sides in Glasgow’s football feud thinking that this news was either too awful or too wonderful to be true.
It is true and it will not go away.
The Scottish champion’s problems with HMRC will be the dominant story out of Ibrox in the next 12 months.
The club’s bank debt is serviceable. The tax bill is not. It’s a game changer.
Martin Bain, as much as one can ascertain over a 15 minutes phone call on a Saturday morning, came across as a really really decent bloke in a difficult position.
I’m sure he cringed when he heard the “Famine song” or saw Manchester policemen kicked to the ground by feral louts in Rangers shirts.
The Ranger’s Chief Executive told me that wee Bain’s team had lost 4-1.
I told Martin to tell his lad to keep his chin up, because you usually find out more about yourself when you lose than when you win.
His dad agreed with me..
Watch this space.