The EBT legacy of David Murray

“I firmly believe until Rangers supporters point the finger at him, they will be in denial for all eternity.”

(https://johnjamessite.wordpress.com/2015/09/26/level-5-and-the-4th-estate/)

This comment, made by a contributor to one of my blogs was never raised in the Scottish Mainstream Media. So-called journalists, notably James Traynor, spent the weekend as guests of David Murray at his estate in Jersey in November 1998. Over dinner,Mr Murray set out his terms of engagement with the print media. Just over nine years later, when HMRC contacted Rangers in regard to their alleged abuse of EBT (February 2008), Murray sycophants turned a blind eye to the far reaching implications of the HMRC correspondence. It should also be noted that later in this year, the bailout of Halifax/Bank of Scotland by Lloyds Bank, ended the soft credit days where Mr Murray was able to write blank cheques, which amounted to almost a billion pounds, safe in the knowledge that Rangers supporting executives at The Bank of Scotland would bend over backwards to honour them. Given that executives at The Bank of Scotland gave CFC notice of one week to fully discharge their debts of £5.2m or they would appoint receivers (March 1994), their sobriquet as ‘The Bank of Rangers’ was well-earned.

Prior to the sale of Rangers to Craig Whyte, Lloyds appointed one of their executives to run Rangers. He reduced long term debt from over £30m to £18m. However,there was a time-bomb ticking from February 2008 which continues to wreak havoc with Rangers to this day.One of the co-authors of a book on Employee Benefit Trusts (EBT), eminent tax QC Andrew Thornhill, appeared as a witness in a four day hearing in July of this year. It is HMRC’s contention that EBT constitute disguised remuneration which is subject to tax.

One of the areas where I posit that Mr Murray may have abnegated on his fiduciary duties was in ignoring the EBTSO(EBT Settlement Offer) amnesty introduced by HMRC. As many as 5,000 employers engaged in EBTs. Where they have been used as a tax efficient alternative to cash bonuses,often using ‘sub-trusts’ to provide long term benefits to employees and/or their families, they invited scrutiny from HMRC.

HMRC introduced the Disguised Remuneration legislation (which took full effect from 6 April 2011) to counter the use
of EBTs, in this manner, in the future, but it also stated that it would continue to pursue possible litigation cases where EBTs had been used in this way historically. HMRC encouraged employers to approach them with a view to reaching a settlement and ultimately avoiding the risk of litigation. It was a classic example of a ‘carrot and stick‘ strategy. In my considered opinion, Mr Murray ignored the carrot and subsequently passed the stick to Craig Whyte.

No-one benefited more from his introduction of EBT than Mr Murray. He pocketed £6.3m. Former managers of Rangers picked up a total of circa £3.5m. The players ‘earned’ £32,311,283, with former captain Barry Ferguson picking up £2.5m. Neil McCann, now a pundit at Sky, banked £500,000. When you add the interests of former directors such as Campbell Ogilvie, who as secretary of the club administered the majority of these trusts, you arrive at a figure approaching £44m. According to HMRC there are other beneficiaries, to an amount of circa £26m , which have not been published.

After a fateful meeting between Mr Murray and Mr Paul Baxendale-Walker, the former signed up to a subscription model as per the pitch of the latter. However having initially engaged the services of Mr Baxendale-Walker, Mr Murray chose to oversee the roll-out of the tax-efficient model on his own.

The advantages of this model were compelling.  When Mr Murray assigned £1m into a trust, from which a player could derive a loan, PAYE Tax and National Insurance of circa £718,000, including the employer’s 13.8% NI contribution, is avoided. As these trust contributions are not classed as earnings, profits are enhanced which leads to concerns about Corporation Tax liability. However this is covered by offsetting these profits against a loss making operation such as was the case with Rangers. Mr Murray was particularly attracted to applying some of the losses arising from his company’s ownership of Rangers to reducing the tax liabilities of Murray International Holdings plc.

Flushed with the prospect of success, Mr Murray then made a significant error.To provide a level of comfort to individuals whom would benefit from the trusts, he provided a letter, on RFC notepaper, which confirmed that should any third party ever compel beneficiaries to repay the loans, Rangers would subsequently reimburse them.

With the issue of side-letters, Mr Murray had transgressed one of the central precepts of the scheme, which is that there is no evidence of an employee having any entitlement to a loan from the EBT.

The side-letters are the smoking gun of Murray’s maladministration of EBT. If he had continued with his subscription to Mr Baxendale-Walker’s services,I doubt whether he would have made these errors.

HMRC pursued MIH and Rangers with vigour once they realized that they would not participate in their amnesty.They are currently appealing a ruling that only upheld five of their thirty petitions to the court. Should they fail in this appeal, they will pursue the matter in The Supreme Court in London. They set out their position clearly when introducing the EBTSO amnesty.

Mr Murray’s introduction of EBT had other ramifications. There was an allegation of ‘financial doping’ which undermined the bid of Charles Green’s new Rangers to adopt the Scottish Premiership share held by the old Rangers.

This is as good a point as any to dispel the notion of demotion, which continues in the reportage of Ian Black at The Scottish Sun. Sevco Scotland/The Rangers Football Club Ltd were not demoted. They applied to join the Scottish Football League when their bid to transfer SPL membership was rejected.

HMRC rejected the CVA, therefore Rangers could not continue as a going concern. Mr Green’s consortium paid £2m for the trading assets (£3.5m had been raised from creditors by Duff & Phelps) prior to the initiation of the liquidation of the old club/company, renamed Rangers 2012, in October 2012.

Did the HMRC demands in February 2008 compel Mr Murray to sell Rangers or did Lloyds bank hold a gun to his head? I am much more persuaded by the former narrative than the latter. We can trace back Mr Murray’s desire to sell the club to the summer of 2008. Was Mr Murray duped by Craig Whyte? I do not accept this for one moment. Mr Whyte was well known as an asset stripper. He was renowned as an individual who more often than not engaged in pe-pack administration. It is my contention that Mr Murray envisaged a scenario where HMRC would not pursue him for his exposure at Rangers. He had hoped to pass the buck to Whyte.

Mr Murray’s guest at his dinner table in 1998, James Traynor, duly proclaimed Craig Whyte as a billionaire with wealth off the radar. In doing so Mr Traynor  sought to exonerate Mr Murray from his part in the ensuing criminal farrago that will be played out in a Scottish courtroom in October. Mr Traynor has long been partial to a lamb dinner.

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7 thoughts on “The EBT legacy of David Murray”

  1. JJ

    What really sticks in my throat with David Murray is how he is sitting nice and pretty and very much financially secure-whilst we scramble around for handouts

    Most of his trading companies have been wound up but it would appear this was all prepacked to allow his family trusts to cherry pick the good and profitable assets-especially those in his property company

    Estimates range from some £50-£80 million net worth to Murray

    When you consider all the shenanigans you would have thought his conscience might have been pricked a wee bit given what he got out of RFC over the years

    And certainly he wasn’t duped-regardless of whether it was HMRC or the Bank that forced his hand–he duped us all

    I often wonder if he worries about a 5 a.m. Knock on the door-perhaps he should BUT methinks that would open a huge can of worms which the establishment(SFA-Bank-Government ) will never allow

    1. As a knight of the realm, he has friends in high places. Proving that he was negligent in regard to EBTSO or the sale to Whyte, would be a non-starter. We are currently in our worst shape off the park in our history, but no-one seems to get it. Have a listen to Tom Winnifrith’s podcast which is linked on MoeGoe’s last post. It begs the question that now that Plan A has gone, how soon will emergency funding be required and which source is most likely to step in, now that everyone knows that King was lying.

      1. I listened to the podcast and the future is so full of ifs/buts and maybes

        Who is going to invest with all this doubt

        You say – no one seems to get it(our perilous financial state) but it’s so obvious to all -except those with blind faith and hope

        The faithful who follow King don’t want to see it but the sooner this shyster is seen for what he is the sooner we shall face reality-regardless of what that brings

        The pain has gone on for far too long now

  2. J.J. : You make some very good points but I take issue of the possibility of further appeals to the supreme court in England , whilst realising this is the last port of call for a lot of cases, I believe it is different under tax law and as this is a third HMRC attempt at this and is there last chance to win in the UK ,I have read many well respected opinions on this and i believe they may have one further shot in the European Court , although again respected people say this may be a step to far for already spiraling costs ! As you will see from the following, it is an appeal to court of session in Scotland or the supreme court , I believe they have equal standing and therefore if Rangers win it is the end unless a separate judge decides the HMRC case is lawful it can go to Europe and take more than 10 years :

    “Appeals beyond the First-Tier Tribunal

    If the appellant or HMRC lose at one level of the system then permission to appeal can be sought, so a client might find himself unexpectedly elevated to the Court of Appeal, the Court of Session in Scotland, or the Supreme Court (the successor to the House of Lords as the highest UK Court). An appeal may bypass some of these stages where a judge is convinced that questions need to be asked of the Court of Justice of the European Union before a case can be satisfactorily resolved. Cases which have been sent to Europe have been known to take up to 13 years to reach a resolution. ”

    https://www.cch.co.u…h.y7HA52xQ.dpuf

    Furthermore proper attention is now being made on those that have continued to pursue this matter after ( although belatedly ) offers of a settlement were made on same terms as Arsenal F.C. and rejected , this includes individuals in HMRC directly involved with some questionable social media presence that could question impartiality.

    The second point I make is it is a demotion if nasty bastards don’t want us ( SPL ) and it forces you to look elsewhere in lower divisions and all that has done is cost them more, us less and Scottish football a mountain to climb and far to many bridges to build.

    I am also of the understanding there was no precedent set beforehand on the issues and the vote to in effect remove us from the SPL constitutes a demotion as the only option left is lower league football ! I also believe it is listed as a demotion by UEFA

    1. Alan

      Thank you for your post. When I set up my account with WordPress I was looking forward to constructive debate and well researched counter arguments. I disagree that the Supreme Court has equal standing to the Court of Session. As I understand matters, should two QC agree that a further appeal is worth pursuing, on a point of law,then it may proceed. The problem faced by HMRC is one of legal precedent. Should the twenty-five petitions not revert to the First Tier Tribunal, then other companies who used EBT might choose not to accept any liability.The European Court in Strasbourg would not be the appropriate forum for a ruling on UK taxation. The fact that eminent tax QC Andrew Thornhill gave evidence has led many to conclude that the appellant would not prevail. In my opinion the issue of side-letters undermines Rangers case. I’m fairly certain that HMRC would have been confident that all trusts that were accompanied by side-letters would have reverted to FTT review. Irrespective of the legality of this issue, there is a question to be asked about the character of individuals who chose not to pay tax and a club that encouraged systemic tax avoidance/evasion. This leads me to your point on UEFA. UEFA have made no determination on Rangers ‘demotion’ nor would they ever do so. It’s important to note that there was a deep-seated resentment from other clubs that Rangers won five league titles using EBT to remunerate their players. There was also a resentment about Murray’s arrogant boast that for every £5 CFC spend, we would spend £10. As we later discovered Murray borrowed the £10 and avoided paying tax on it.
      The chairmen of the other clubs considered TRFCL to be a new club and had they allowed a new club a place in the SPL it would have led to UEFA sanctions. If you look at Parma in the Italian league, starting again from the lowest tier was the only route open to them. If they or Rangers had been fast- tracked in to the top tiers of their respective national leagues, the appeals from disadvantaged clubs and other European clubs would have caused more disruption than our renaissance in SFL II. Alan, as fans we rarely questioned the actions of David Murray. Only a select few of us had shares so we had no voice. However when he sold our club to Craig Whyte he set in train the havoc of the last three seasons. When he engaged in EBT, he forced Rangers to go head to head with HMRC. I have serious misgivings about Murray’s legacy.

  3. Alan

    There was no need to repeat your post and no question that it would pass moderation. All views are welcome on this forum. I encourage robust debate. I wholeheartedly welcome links to other sites (such as MoeGoe’s) that provide insight from a truly independent perspective where there is no agenda.

    I have only trashed two posts since the inception of this site. I will not censor those who use ‘industrial’ language should the points they make add value, or they come from a respected source.

    Please try to exercise a little patience and proceed on the basis that your comments will be approved.

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