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Scotland's Court of Session has ruled in favour of HM Revenue & Customs (HMRC) in the case of Glasgow Rangers football club, despite two earlier tribunal defeats.

HMRC forced the club's original owners, Murray Group, into liquidation in 2012 by refusing to recognize an employee benefits trust (EBT) set up for its players and staff.

The EBT was in operation for nearly ten years before HMRC deemed that the cash bonuses it paid out as loans were in fact disguised remuneration, for which the club was liable to full income tax and national insurance contributions amounting to GBP75 million, including penalties.

The club challenged HMRC's assessment at the First-tier Tax Tribunal in 2012, where it won on the basis that the payments from the trust were genuine discretionary loans. An important factor in its ruling was that each individual employee was not a beneficiary to the sub-trust in his name, instead being named as the protector of his sub-trust with the power to nominate beneficiaries on his death and to appoint different protectors and trustees.

HMRC then took the case to the Upper Tax tribunal, where in 2014 Rangers won again. Initially HMRC was refused leave to appeal this decision, but later obtained leave to refer it to Scotland's Inner Court of Session.

This court has now accepted HMRC's argument and found that both the earlier tribunal decisions were wrong in law. It considered the fact that some of the employees had been given a secret 'side letter' separate from the employment contract, setting out their EBT rights – this implied the EBT formed part of the remuneration package and the payments via the trust were a mere redirection of employment income, the Court of Session ruled (Advocate General for Scotland v Murray Group Holdings).

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Published on our website on Nov.10, 2015