“Red And Yellow And…Eh, Rangers?”
As we continue our dissection of the findings of the First Tier Tax Tribunal appeals panel (FTT(T)), we look to the proverbial Rangers rainbow. Mr Red, Mr Yellow, Mr Turquoise, Mr Green (no, not Charles), Mr Violet (an ex-Rangers manager), Mr Grey, Mr Black (no, not the midfielder who enjoys kicking people up in the air), Mr Blue, Mrs Crimson, Mr Silver (a Spanish football agent), Mr Gold (a former Rangers player), Mr Purple, Mr Indigo (ex-Rangers board member), Mr Magenta and Mr Scarlet (no, not Captain Scarlet), were all pseudonyms given to witnesses who gave evidence at the appeals tribunal, over a seventeen day period.
At this point, I should state that, whilst many people may wish to speculate with regards to the identity of these individuals, I have no intent or interest in indulging in such discussions. With this in mind, any comments regarding the identities of these people will be deleted from the website. This decision has been made in order to protect both myself and “Maley’s Bhoys”, and I thank you all for adhering to it.
So, without wasting any more time, let us turn to Mr Red, a chartered tax advisor for MIH. Mr Red began his evidence by stating that he believed that the Trusts were “not a means of tax avoidance”. However, it was soon put to him that “it was noted in an internal memo prepared by Mr Red dated 8 September 2005 to the Board of MIH that he had described the Trust as a form of “tax avoidance scheme””. Following this, Mr Red became “somewhat defensive in his evidence”.
Mr Red then proceeded to state, with regards to “side letters” that “It was not a financial entitlement, he insisted, nor did it represent, in his view, a payment to a player.”
Interesting, he then went on to say finally, “Crucially the mechanism of the Trust and sub-trusts provided a cheaper way to produce a certain net amount. Mr Red strove to argue that the employee (including the footballers) did not elect between a payroll payment, made net of tax, and a trust “benefit”. At the conclusion of his evidence (see Notes of Evidence for 28/10/10 at p80), he stated that he doubted whether any employee was ever given an option between either benefit as such.”
Now, I could be wrong here (apologies if I am) but was the case of Ronald Wattereus not cited in one of Mark Daly’s documentaries, when he discussed his concerns with his agent regarding a portion of his wages being placed in “an offshore trust”? If I do indeed remember correctly, he was told something similar to, “you can either have X amount in your wages and Y amount in your trust, or you can only have X amount”. If someone could confirm or deny this that would be much appreciated.
Next, we move to Mr Yellow, a member of the senior management team at MIH. Mr Yellow “he conceded the description of it as “tax avoidance” and agreed that it offered tax advantages.” He continued by saying, “he had an expectation of a bonus annually, he had no contractual right to it.”
Intriguingly, he went on to state that “He could choose to have this paid directly to him, subject to PAYE and NIC. Alternatively the Group could make a payment into the Trust…”
Next up, Mr Turquoise, a long standing tax partner who was contacted by the Club in 2002 to help a player with his tax affairs.
The tribunal’s report states “Mr Turquoise explained that he had been persuaded to recommend the Trust’s loan facility given that his client intended to invest the monies and so would be able to make repayment as and when required, and further that he had secured an appropriate tax indemnity from Rangers. His other concern was that the loan arrangement might be viewed as beneficial for tax purposes…”
Leaving Mr Turquoise, for Mr Green, someone involved at a senior level with another part of the Murray Group (Premier Property Group, “PPG”). He went on to discuss changes that had been made to his payment scheme in 2004, and the FTT(T) appeal verdict states, “Mr Green had received bonuses subject to PAYE deductions, but in 2004 it was proposed by PPG to pay him a bonus via the Trust. In cross-examination Mr Green insisted that he did not have an option of having payment made directly to himself and subject to PAYE. Rather, he had the “opportunity” of a payment being made into trust.”
Interestingly, it continues “He had withdrawn loans from his sub-trust to build up funds for house-purchase purposes. He believed (perhaps incorrectly) that funds would thus be more readily accessible.”
Next, we have Mr Violet, a former Rangers manager. With regards to his trust fund, he told the tribunal “that he had received from Rangers, in addition to his contract of employment, a separate document in respect of “his” sub-trust. His concern was in securing a satisfactory overall financial “package”. He understood in general terms that he could access monies in the sub-trust by way of loan and that ordinarily the Trustee would be agreeable to this. He had used the loan facility and had not expected to have to make repayment during his lifetime.”
However, I feel I should highlight that “He did in fact make a repayment of £82,000 on one occasion.” Also, it is worthy of note that “After Mr Violet had left Rangers “his” sub-trust had continued.”
Mr Grey was the next “colour” to give evidence to the tribunal. A sports law lecturer at a Scottish University, he began by stating “the Scottish Football Association requires disclosure of the terms of a footballer’s contract but that does not extend, as he understands, to payments from a remuneration trust.”
He continued by saying “Mr Grey spoke highly of Rangers as a negotiating party. He acknowledged that the use of the remuneration trust enabled the Club to negotiate a more beneficial deal in as much as PAYE and NIC liabilities were mitigated. He considered the loan arrangement advantageous.”
He went on to stress that “he viewed the loan facility afforded by the sub-trust to the player as repayable and enforceable as a debt for Inheritance Tax purposes. While the term would normally be for 10 years, he believed that it could be continued, and in effect become a “revolving” facility.”
Finally, he stated, with regards to negotiating with Rangers that “he had never experienced having to advise his clients on an option between a trust benefit and an alternative “net of tax” payment. The opportunity to play for Rangers represented an important career development for his clients, and the financial “package” in totality was usually irresistible.”
Next up, Mr Black, who said early in his evidence that he “did not consider the Trust as a means of tax avoidance, but rather as a means of retaining and rewarding loyal employees. So far as Rangers was concerned it enabled the Club to attract players who would not otherwise have been obtainable.”
However, he soon distanced himself from contractual discussions themselves by saying “while he [Mr Black] had been involved in “signing and selling” 350-400 players in 20 years of involvement at Rangers, he had not, and could not, because of all his commitments, devote any real time to detailed contractual negotiations. At the start of each football season he would meet with his manager to decide on which players might be possible recruits. The manager would have an approved budget for this purpose.”
The tribunal next turned it’s attention to Mrs Crimson, the current managing trustee of the trusts relating to the Murray Group. Much of her evidence was rather technical in it’s detail, but one important thing the verdict does highlight is that “In cross-examination Mrs Crimson was pressed about Trident’s willingness to extend loans, the first of which would fall due for repayment in 2011. She explained that she and another director scrutinised loan applications after a preliminary review undertaken by two subordinate employees. She spoke to the very limited criteria to be applied in approving a loan application. She maintained that it was reasonable to advance a loan of an amount up to the applicant’s payroll wage.”
However, for more on Mrs Crimson, you’d best see the bottom of the article.
Next, the panel heard from Mr Silver via a video link, a Spanish football agent who was involved with the transfers of several players to Rangers Football Club in the mid 2000’s. I think it would be best now if I simply quoted the entirity of paragraph forty nine, as follows:
“In particular Mr Silver acted on behalf of Mr Inverness in 2004 when he joined Rangers. He explained the remuneration “package” which he had concluded on his client’s behalf. It comprised a salary of £130,000 per annum, a guaranteed bonus of £100,000, and a variety of other benefits. In addition the “package” included possible inclusion in the Remuneration Trust for a “recommended” amount of £118,000. The negotiation was not lengthy: the package was proposed on a “take it or leave it” basis. Mr Inverness was keen to join Rangers and would not have quibbled significantly on the terms. In response to the Tribunal Mr Silver insisted that any benefit from the Remuneration Trust was a distinct matter: it could not be exchanged for another benefit. While the £118,000 benefit was expected, it was not 100% certain.”
The last line is particularly critical, and seems to have been a point of some contention during both the initial tribunal and the following appeal.
Mr Silver goes onto say “While the Club did not control the Trust, it was expected that the Trustees would follow its (reasonable) wishes. A loan, not repayable until death, would ordinarily be available to the player.”
Mr Gold, another ex-Rangers player now involved in football coaching, next gave evidence. He “gave evidence of the re-negotiation of his employment contract with the Club. In addition to his original salary being continued, contributions to the Trust would be made totalling £500,000. These again would be held in trust. Mr Gold was content with the offer and did not seek to re-negotiate its terms. He took legal advice, who confirmed that it was a trust effective under English Law, whereby he himself could not dispose of the trust fund.”
“On the re-negotiation of the contract he completed a Letter of Wishes and Loan Request, although in the event he chose not to take advantage of this.”
Next came Mr Purple, an ex-footballer currently involved in media. Once again, I’ll quote the full paragraph for the sake of simplicity.
“Then Mr Purple gave evidence. He presently works in the media and was formerly a professional footballer. (He too was a client of the witness, Mr Grey). He was the subject of a bid by Rangers during the course of his career in the period before the Trust was set up. His contract was negotiated by Mr Grey and then subsequently re-negotiated at a time when the Trust was in use. A major change then was that half of the “consideration” would be paid into the Trust but could be accessed by way of loan arrangement. He had been reassured by Mr Grey that the Trust arrangement was effective and legitimate in law. At the conclusion of his evidence Mr Purple confirmed that he had never been given the option of any alternative to the loan arrangement.”
Mr Purple was followed by Mr Blue, a senior member of the management team at another Murray Group subsidiary. Mr Blue stated two points of interest. Firstly, the tribunal noted that “Mr Blue appeared to suggest that the favoured employee would be given an option between a trust contribution and a cash bonus. However, in his evidence (see Notes – 3/11/10 – pages 164-166), he indicated that a specific figure was not mentioned until he had accepted the trust payment.”
Finally, Mr Blue stated “that there was no contractual right to a bonus.”
Next up; Mr Indigo, a board member at Ibrox since 2000. Early in his evidence, “He acknowledged that he was aware of HMRC’s interest from about 2005.”
He also stated that: “He was not aware that “side-letters” as separate documents from the main contract had ordinarily been executed on the same day. He was not surprised, he claimed, that the practice of “side-letters” had not been disclosed to HMRC until about 2008. He had understood that the use made of the Remuneration Trust by Rangers was proper and acceptable.”
Mr Indigo went on by saying: “He resisted strongly the suggestion that the Trust benefits were “disguised” remuneration. He insisted that they were not paid to the player or other employee. This was a “trust” arrangement. The player/employee had to seek a loan, sometimes taking the initiative himself. Not all did so. On occasion, proposed trust contributions were not made. There was only an expectation of these, not a contractual right.”
Despite his previous statement, Mr Indigo goes on to contradict himself somewhat by saying “While the payment record of contributions to Mr Indigo’s trust seemed regular, he claimed in his evidence that there had been a significant repeated delay in payment. Had there been failure to make a payment Mr Indigo indicated that he would not have continued working for the Club.”
So the payments into Trusts were not contractual, but expected to the degree whereby he would have left his post at the Football Club if they had not been made? Once again, this appears to be a point of some discussion.
Second to last, we encounter Mr Magenta (no, not the character from the X-Men), someone who worked on “football administration matters within Rangers”.
Having learned about the trust’s in 2001/2002, Mr Magenta’s evidence states that “Initially the trust mechanism had been used to make bonus payments, securing (only) a NIC advantage. The related loan facility provided a valuable opportunity for the players and with only one exception (Mr Gold) had been taken up. Mr Magenta had been involved in administering the related paperwork.”
He continued “There was a distinction, he insisted in cross-examination, between contractual payments and payments into trust. He spoke to a series of documents recording these. He insisted that there was no obligation on Rangers to report trust payments to the SFA.”
Interestingly, it is worthy of note that “Mr Magenta himself had an allocated sub-trust set up in 2003. He preferred its benefits to a bonus paid to him directly and subject to PAYE. He valued the loan facility and the Inheritance Tax benefits. He was “protector” of his own sub-trust. However, after about 2005 Rangers decided to increase his salary instead of enhancing his trust benefits. He explained that he was hopeful of extending the duration of his loan.”
And, last of all, we come to the evidence given by Mr Scarlet (no, he’s not invincible). The first part of his evidence sums the situation up, at least in the early years, fairly succinctly; “Mr Scarlet’s own sub-trust was established in September 2001 after discussions with Mr Red. He understood that he could have a 10 year loan of funds contributed to his sub-trust, all free of tax, and that this could be extended thereafter. The loan would represent a debt on his estate, reducing its value for Inheritance Tax purposes. Then the trust fund might be made over to his wife and/or family. He had secured an indemnity from Rangers against any personal tax liability.”
He goes on to say “The value of a sub-trust arrangement was, he would explain, that contributions to it could be made free of charges under PAYE and NIC. These contributions in full could then be made available by loan to the player. Larger sums effectively could be released and the term of a loan extended.”
Continuing, he states “Such arrangements were cheaper for Rangers in view of tax and NIC savings. If trust contributions could be staggered, Mr Scarlet explained, that had cash flow advantages for the Club and also helped to retain the player. Trust contributions, he added, would not be disclosed to the Scottish Football authorities.”
Lastly, I would like to highlight something of intrigue and concern. The documents reveal that Mr Red met with Mrs Crimson on the eve of her giving her evidence to the appeals tribunal, having “collected her from Edinburgh Airport it seems that there was some discussion about Trust matters and he passed to her for her consideration that evening certain extra documents…”
As with all of the evidence above (which is all taken straight from the tribunal’s report), I will leave you to draw your own conclusions.