Supreme Court rules in favour of HMRC in Rangers’ “big tax case”

The Supreme Court has ruled in favour of HM Revenue & Customs (HMRC) in its tax dispute with Scottish Premiership side Rangers.

Known as the “big tax case”, around £47 million was paid to players, managers, and directors via Employee Benefit Trusts (EBTs) between 2001 and 2010.

Two tax tribunals had previously found in Rangers’ favour, but the Court of Session found in favour of HMRC after its appeal in 2015. The case was subsequently appealed to the Supreme Court.

HMRC argued that the payments made via EBTs in Jersey were agreed in “side letters”, which were separate agreements to employment contracts and were hidden from HMRC and associated football authorities.

Five Supreme Court judges unanimously agreed with HMRC and ruled that Rangers’ payments into EBTs were subject to income tax and National Insurance contributions under PAYE rules.

In the written judgement, the Supreme Court said: “The discretionary bonuses made available to RFC’s employees through the same trust mechanisms also fall within the tax charge as these were given in respect of the employee’s work. Payment to the Principal Trust should have been subject to deduction of income tax under the PAYE regulations.”

David Richardson, director-general of HMRC’s customer compliance group, said: “The unanimous decision of the Supreme Court supports our view that employment benefit trust avoidance schemes simply do not work.”

The ruling will have much wider implications for sports clubs that have used similar schemes.

Mr Richardson added: “we encourage anyone who’s tried to avoid tax on their earnings to now agree with us the tax owed. HMRC will always challenge contrived arrangements that try to deliver tax advantages never intended by parliament.”

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Mohit Pasricha

Mohit Pasricha

Solicitor at Mackrell Turner Garrett
Mohit is a member of Mackrell Turner Garrett’s Corporate and Commercial Department in London. He joined the firm as a trainee in 2014, having completed a Law LLB at the University of Surrey and a Legal Practice Course at the University of Law.
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