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