HMRC wins appeal in Rangers tax case - what does ruling mean?

Judges in the Inner House of the Court of Session allowed an appeal by the Advocate General for Scotland, acting on behalf of HMRC, over the use of the now-outlawed Employee Benefit Trusts during the first decade of the century by companies run by Sir David Murray, including the now-liquidated Rangers.

The court ruling, summarised on the Judiciary of Scotland website, agreed with HMRC's contention that the scheme amounted to "a mere redirection of earnings which did not remove the liability of employees to income tax".

“That accords with common sense," said Lord Drummond Young. "If the law were otherwise, an employee could readily avoid tax by redirecting income to members of his family to meet outgoings that he would normally pay: for example to a trust for his wife...or to trustees to pay for his children’s education or the outgoings on the family home.

"The funds are ultimately derived as consideration for the employee’s services, and on that basis they are properly to be considered emoluments or earnings.”

The decision is in relation to Murray Group companies including the liquidated company now called RFC 2012 plc and does not affect the current regime at Ibrox.

Depending upon further appeals, in purely sporting terms, this decision means there must be a huge question mark placed over trophies the 'old' Rangers won while the EBT system was in place between 2001 and 2010 before the 'old' Glasgow club was liquidated in 2012. HMRC are claiming around £46.2m of unpaid tax from Murray's time as owner. The term 'financial doping' has been used in relation to the use of EBTs. Scottish titles, Scottish Cups and Scottish League Cups were all won as well as qualification for the Champions League and UEFA Cup while avoiding paying tax on players' earnings.

It will be up to the Scottish Football Association about what to do next, but this ruling opens up a huge can of worms with a number of prominent journalists who have covered the goings on at Rangers extensively already raising the suggestion that Rangers effectively cheated by signing a number of leading players who did not pay the proper amount of tax.