The Supreme Court has ruled in favour of HM Revenue and Customs (HMRC) in its fight with Rangers over the club’s use of Employee Benefit Trusts (EBTs).

The case concerned the use by the Glasgow-based football club of EBTs to funnel £50m of payments to employees from 2001, in a case known as the “big tax case”.

More than £47m was paid to players, managers and directors between 2001 and 2010 in tax-free loans which were agreed in “side letters”, which were separate agreements to employment contracts and were hidden from the taxman and the football authorities.

Lord Hodge and four fellow judges agreed with HMRC’s contention that any payments made through EBTs should be considered taxable income rather than loans.

Further companies that paid staff via “contrived” EBT’s have been urged to come forward, after the landmark victory case won by HMRC pre-empted dramatic consequences for those who have used the schemes.

David Richardson, director general of HMRC’s customer compliance group said:

“This decision has wide-ranging implications for other avoidance cases and we encourage anyone who has 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.”

HMRC could now issue “follower notices”, which would demand payment from companies who ran similar schemes, after the settlement opportunity in light of the 2010 legislation crackdown on EBT’s ran out in July 2015.

Two tribunals in 2012 and 2014 had previously found in Rangers’ favour, but the Court of Session found in favour of HMRC after an appeal in 2015.

Liquidators BDO were then allowed to appeal to the Supreme Court in London.

The court’s decision is not expected to have any material or financial impact on Rangers now as the club is owned by a different company.

In a written judgment, the judges said:

“The sums paid to the trustee of the Principal Trust for a footballer constituted the footballer’s earnings. The risk that the trustee might not set up a sub-trust or give a loan of the sub-trust funds to the footballer does not alter the nature of the payments made to the trustee of the Principal Trust .

“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.”

Former Rangers chairman Sir David Murray said he was “hugely disappointed” with the verdict, which he said ran counter to the legal advice which was consistently provided to Rangers Football Club:

“It should be emphasised that there have been no allegations made by HMRC or any of the courts that the club was involved in tax evasion, which is a criminal offence.

“The decision will be greeted with dismay by the ordinary creditors of the club, many of which are small businesses, who will now receive a much lower distribution in the liquidation of the club, which occurred during the ownership of Craig Whyte, than may otherwise have been the case.


Rebecca joined the HRreview editorial team in January 2016. After graduating from the University of Sheffield Hallam in 2013 with a BA in English Literature, Rebecca has spent five years working in print and online journalism in Manchester and London. In the past she has been part of the editorial teams at Sleeper and Dezeen and has founded her own arts collective.