Pump Court Tax Chambers scores victory in Rangers tax case

Pump Court Tax Chambers has secured a major victory for the former owners of Rangers Football Club in a legal battle with HMRC.

The Murray Group instructed Edinburgh partner David Horne of HBJ Gateley, who used to work in-house for the organisation, to argue that payments made to players, staff and other employees in the form of tax-free loans were legal. Horne instructed a Pump Court team led by Andrew Thornhill QC, Jonathan Bremner and Thomas Chacko, and Mark Studer of Wilberforce Chambers.

A judgment from the First Tier Tax Tribunal ruled that the £48m in Employee Benefit Trusts payments were loans – saving The Murray Group a potentially massive tax bill.

HMRC instructed Roderick Thomson QC of Terra Firma Chambers via the office of the advocate general in Scotland.

The split judgment said: “The majority view reflects the argument that the controversial monies received by the employees were not paid to them as their absolute entitlement.

“The legal effect of the trust/loan structure was sufficient to preclude this. Thus the payments are loans, not earnings, and so are recoverable from the employee or his estate.”

Horne said it was not the case that players could face requests from the liquidators of old company Rangers for the money back as the payments were made by trustees.

Horne said: “I’m very pleased that the court has managed to come to this judgment, which follows previous legal precedent on the legality of providing these incentives to employees. There’s been a lot of ill-informed public speculation and it’s good to draw a line under this case.”

Horne added that legislation has since been passed making the incentives a lot less efficient.

HMRC said it was disappointed with the ruling, that it is “committed to tackling avoidance” and that it is considering an appeal of the decision.

The former Rangers Football Club used the Employee Benefit Trusts scheme to make payments between 2001 and 2010. Murray International Holdings was the majority shareholder of the club until Craig Whyte’s takeover in 2011.

The financial fallout and subsequent liquidation of the old company is the subject of ongoing litigation (6 November 2012).