Could this have been a better solution

[calscot 0]

Just thinking at a simplistic level - could we have avoided the tax case and reduced our liability by calling the "loans" in and then setting up new contracts for those ex-staff-members to do something nominal for the same amount and pay the tax on that?

 

That sounds like a bill of about £19m. The only problem is that it needed someone to underwrite it.

 

However, you could start up the new contracts in parallel to the loan repayments over a period of say 10 years and so spread the payments. The former employees would lose nothing - they could even get paid just before the loan repayments.

 

Or, instead of selling the club, SDM could have devalued his shares to £1 and then floated a £20m share issue which could have given the fans half ownership and a consortium the other half.

 

Surely that share issue with no threat of the tax case would be attractive to fans and current bidders alike?

 

A scheme like that would at least avoid the 50 odd million in penalties AND interest. If the loans are repaid then it seems the tax loophole is fully and explicitly legal.

[Bluedell 6,079]

Just thinking at a simplistic level - could we have avoided the tax case and reduced our liability by calling the "loans" in and then setting up new contracts for those ex-staff-members to do something nominal for the same amount and pay the tax on that?

 

That sounds like a bill of about £19m. The only problem is that it needed someone to underwrite it.

 

However, you could start up the new contracts in parallel to the loan repayments over a period of say 10 years and so spread the payments. The former employees would lose nothing - they could even get paid just before the loan repayments.

 

There's a number of problems with that.

 

1. If we are guilty of tax avoidance with the EBTs, calling in the loans doesn't take away from the fact that tax wasn't paid at the time. It would not stop the BTC.

 

2. The scheme would be seen prima facie evidence that the loans were linked to the club and were not discretionary given the amounts would match.

 

3. The players may not (probably would not) agree to it. Are we (or the trustees) going to start taking our ex-players to court to get repayment?

 

4. It's the trustees that can ask for the loans to be repaid, not the club.

 

 

Or, instead of selling the club, SDM could have devalued his shares to £1

He did.

 

and then floated a £20m share issue which could have given the fans half ownership and a consortium the other half.

 

Surely that share issue with no threat of the tax case would be attractive to fans and current bidders alike?

 

Not sure if I understand? is this in conjunction with the loan repayment scheme? If the BTC didn't exist then there would be no problem in getting rid of the shares. If it does exist the support would not touch a share issue.

[calscot 0]

There's a number of problems with that.

 

1. If we are guilty of tax avoidance with the EBTs, calling in the loans doesn't take away from the fact that tax wasn't paid at the time. It would not stop the BTC.

 

What tax? There would be no tax due, it would be a bona fide EBT. Cast iron. They would be loans not wages - which are tax free according to the rules. HMRC argument is that they were neither loans nor discretionary and wholly based on probabilities over conceptions of intent. If the loans are paid back then their argument is non-existent.

 

2. The scheme would be seen prima facie evidence that the loans were linked to the club and were not discretionary given the amounts would match.

 

Ok, that seems like a problem. Perhaps if the payments don't quite match and all the players are under contract as scouts with bonuses for referals...

 

3. The players may not (probably would not) agree to it. Are we (or the trustees) going to start taking our ex-players to court to get repayment?

 

I don't quite see the need to take them to court. A demand for repayment is evidence enough that it was a loan. If we don't get paid despite the demand, that does not make it a salaried contract.

 

4. It's the trustees that can ask for the loans to be repaid, not the club.

 

Surely the trustees would co-operate given that that was the rules of the EBT? If not then surely Rangers have done nothing wrong and it's the trustees who are at fault?

 

He did.

 

Not in the context I'm suggesting. My point is that he did, but he could have done the same thing in a different way. That is, devalue the company to £1, then issue new shares at whatever each. So if you raise £20m, all the old shares combined are worth 1/20m of the company. I'm not sure if that is possible in the intricacies of the business world but it sounds logical to me.

 

Not sure if I understand? is this in conjunction with the loan repayment scheme? If the BTC didn't exist then there would be no problem in getting rid of the shares. If it does exist the support would not touch a share issue.

 

The point was to adjust things so that we now owe an extra £19m for a tax bill (although it doesn't sound as plausible in my head now), but once paid, there is no more threat to the club - bar the £14m of legacy debt which would be manageable. Who would NOT buy into that? Or do we need our club teetering on the edge of extinction to buy into pretty much the same thing?

 

Like I said it's simplistic but if it's plausible at first glance, then one of the business whizz-kids could surely flesh it out?

[stewarty 2,123]

Can't imagine any former employee who received even a few thousand pounds would want to get dragged into this mess any further than it is currently.

[calscot 0]

Can't imagine any former employee who received even a few thousand pounds would want to get dragged into this mess any further than it is currently.

 

But if they would rather see the club go under than get a bit involved then why should we care about them? Why not just call the loan in? It wasn't contractual, why not turn the EBT into what it purports to be?

 

If we call in the loans and nobody pays, where does it say we have to sue them? We just write it off as bad debt...

 

It's a little bit ironic that the arguments against what I'm saying seems to be, "but they're not really EBTs"... Why don't we make them such? If it walks like a duck and quacks like a duck...

 

It all seems to be conceptual. Why don't we call in 0.1% and give the rest as a discretionary payment? That way it's proven to be discretionary and not contractual.

 

The whole thing is due to a totally stupid tax law. I can't see how we can't do something discretionary that makes the payments discretionary and therefore within the rules...

 

Please, someone show me where my thinking is wrong when based on actually having EBTs?

 

Ok here's how I understand it. Imagine there's a plumber who's your friend and he puts in a new bathroom for you. Instead of you paying for all the labour (at mate's rates), for tax reasons you agree to pay him half, and give a personal loan between mates for the other half but in the expectancy he never pays it back. He therefore doesn't have to pay tax on the second amount. Then the tax office gets on his back saying it was part of the contract. What happens if he then pays the loan back? Is there still tax due? After all there was no terms on the loan...

 

Now imagine instead HMRC came after YOU for 10 times the money which was going to put you out of business. Would you call in the loan to save yourself? You could always get him to do some small job and pay him the money owed with full tax later...

[Bluedell 6,079]

What tax? There would be no tax due, it would be a bona fide EBT. Cast iron. They would be loans not wages - which are tax free according to the rules. HMRC argument is that they were neither loans nor discretionary and wholly based on probabilities over conceptions of intent. If the loans are paid back then their argument is non-existent.

 

The argument is not just as simple as is it a loan or not. There is also the discretionary element of it which your scheme doesn't address plus some other issues.

 

There are also tax issues in respect of loans.

 

A demand for repayment isn't proof that it was a loan.

 

Do the trustees have the ability to demand repayment anyway, or is at the recipient's discretion? I'm not sure about that point.

[calscot 0]

The argument is not just as simple as is it a loan or not. There is also the discretionary element of it which your scheme doesn't address plus some other issues.

 

But surely by asking for all or some of the money back you are explicitly showing it was discretionary and not a contract?

 

There are also tax issues in respect of loans.

 

But nowhere near as much as wages. What if you charge interest? But it still seems that if it's in an EBT then it's tax free. The EBT must be tax free in some circumstances or why did we use them? All I'm really saying is do something to show the EBT is an EBT and not a contract. Maybe I don't understand the discretionary bit. Seems to me that if you get one person to pay something back and let the others off at your discretion, you're ipso facto being discretionary.

 

 

A demand for repayment isn't proof that it was a loan.

 

Then what is? Are they loans or not? I was under the impression there was some loan element which at the trustees discretion would be called in or not. Therefore you have a trust worded as a loan and a demand for the loan, therefore it must be a loan.

 

Do the trustees have the ability to demand repayment anyway, or is at the recipient's discretion? I'm not sure about that point.

 

But if that's the case, how can HMRC prove we did anything wrong? And in the same vein, could we not ask some of them to pay something back at their discretion (after all the club could do with some dosh) thereby proving the EBT's are discretionary?

 

Maybe we're getting lost in my examples: my argument is really pretty simple - why can't we do "stuff" that shows the payments were discretionary and makes the EBTs cast in iron?

 

Like I said, it's a stupid tax law and I really can't see how HMRC have much of a case in something so woolly. However, the law is an ass...

[Bluedell 6,079]

But surely by asking for all or some of the money back you are explicitly showing it was discretionary and not a contract?

 

No it's the granting of it that needs to be discretionary. If you can't do that then all else fails.

[calscot 0]

No it's the granting of it that needs to be discretionary. If you can't do that then all else fails.

 

I get you but surely the granting was worded in a way that was discretionary and just because it was paid every time doesn't mean that it wasn't at the trustees discretion. That seems to me to be impossible to prove that it wasn't discretionary - unless they find a bona fide contract.

 

I have discretionary death in service benefit but as far as I know it's always paid out. However, it means I couldn't get a interest only mortgage based on it (not that I'd ever want one) or secure anything else on it.

 

It still seems to me the problem is a stupid tax law and it should be HMRC paying for their mistake, not us - they should basically change the rules and move on. They made the rules and SDM just played by them or actually exploited them. I can't see why we should be so severely punished for that. It's like banning a player for 20 years for a dive - when it's not even very conclusive that it ever was one...

[Bluedell 6,079]

I get you but surely the granting was worded in a way that was discretionary and just because it was paid every time doesn't mean that it wasn't at the trustees discretion. That seems to me to be impossible to prove that it wasn't discretionary - unless they find a bona fide contract.

 

I think that the whole crux of the case. If they have evidence then we're stuffed. If they don't then we could win. It probably doesn't need to be a contract, but a letter or email could be used against us.