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Tax bill that prompted Rangers’ collapse ‘overestimated by £50m’

View outside Ibrox stadium prior to September's Premiership match between Rangers and Celtic (by Mark Runnacles/Getty Images)

The old operating company of Scottish Premiership football club Rangers’ is to see up to £50m (€58.4m/$64.2m) wiped off the tax bill it owes Her Majesty’s Revenue and Customs (HMRC) as part of the scandal that led to its high-profile collapse in 2012, it has been claimed.

The Times newspaper, citing accountancy sources, said HMRC has admitted it claimed too much. The outstanding bill for utilising an offshore trust to pay players and staff is “likely to stand” at around £20m – or £2m per year — for the 2001 to 2010 period in which the Employee Benefit Trust (EBT) tax avoidance scheme was in place.

Former Rangers chairman John McClelland told the newspaper that uncertainty over the club’s tax burden dissuaded would-be investors at the time and led to its collapse. He said that had a £20m tax bill been agreed during his tenure, it would have been relatively straightforward to secure a credible buyer.

McClelland remarked: “At the time of the sale of the club in 2011, had the tax claim been at the level now being reported then, in my opinion, the outcome would have been different. I believe there would certainly have been a much higher level of interest in acquiring it and therefore more potential buyers.”

In 2011, the club was sold to Scottish businessman Craig Whyte for £1, but Whyte also paid off the £18m owed to Lloyds Banking Group. However, it later emerged that he settled the bank debt by mortgaging future season ticket income. The Glasgow giant entered administration in February 2012 following legal action by HMRC over alleged non-payment of around £9m in PAYE and VAT tax.

English businessman Charles Green in June 2012 completed a takeover in a £5.5m “newco acquisition” that resulted in the liquidation of Rangers in its original guise and its rebirth in the Third Division, the bottom tier of the Scottish professional game.

HMRC had been pursuing Rangers over its use of its EBT scheme, believing that this was operating as “disguised remuneration” and should have been subject to income tax and national insurance. HMRC is reported to have entered a claim with BDO, liquidator of the Rangers oldco, RFC 2012, for £94m, with more than £74m relating to liabilities, interest and penalties on debts.

HMRC has now, according to The Times, dropped a £24m penalty claim on the EBT, with an appeal in place over the value of the £36.6m principal sum. If this appeal is successful,it is claimed that the latter figure is likely to be reduced to closer to £20m, with a £12m interest claim also lowering substantially.

The changes in the tax liability have no direct impact on Rangers International Football Club, the current operating company of Rangers, and the club is yet to comment on today’s (Thursday’s) report. An HMRC spokesman said: “We don’t comment on identifiable businesses. HMRC has always been clear that disguised remuneration is a form of tax avoidance.”