The SPL has set up an independent commission chaired by Lord Nimmo Smith, to investigate the Glasgow Rangers FC’s alleged use of improperly registered players from 2000 to 2011.
This relates to Rangers’ use of an Employee Benefit Trust (EBT) scheme to pay players over that same period.
EBT’s were a legal tax avoidance scheme, whereby companies paid money into an independent (ahem) trust, which would then “loan” the employee sums of money which in most cases need never be paid back.
As loans, monies paid via EBT were not subject to tax—employees could earn a lot more money than would otherwise be the case.
The problem with EBT’s is that there had to be a large element of trust between employer and employee.
EBT’s could not be used to make contractual payments to employees.
In fact, the employee had to “apply” to the trust for the loan, which—in theory—the trust could reject.
Rangers ran into trouble for their use of EBT’s because the payments players received from the trust were contractual in nature.
The UK tax authority, HMRC, has presented Rangers with a tax “assessment” for £36m in unpaid taxes, with a penalty still to be imposed.
Rangers appealed the assessment, and we still await the result of the tax tribunal which was asked to decide on the case.
Unquestionably, the use of EBT’s gave Rangers a sporting advantage against the competition over the course of a decade.
For example, let’s say Rangers wished to sign player x and offered him £20,000 per week, and Celtic wished to sign the same player, and also offered him £20,000 per week.
By having his wages taxed at Celtic, player x would take home roughly £12,000 per week, while at Rangers, the majority of his wages being paid through an EBT, the player would take home closer to £18,000 per week.
Paying players by means of EBT enabled Rangers to assemble teams they could not otherwise have afforded.
There is always the possibility that the tribunal will find in Rangers’ favour, but even if it does, the Rangers’ problem with the SPL remains.
SFA rules state that all payments made to players must be clearly recorded on their contracts which are lodged with the soccer governing authorities.
If Rangers’ EBT’s were administered properly, then the payments cannot have been registered on the players’ contracts.
The respected Scottish legal firm Harper McLeod has already conducted an investigation for the SPL and has concluded that there is a prima facie case for Rangers to answer.
That is, on the face of it, Rangers appears to have made undeclared payments to players over a ten year period.
As I explained in my previous article, The Rangers Football Club—the company formerly known as Sevco Scotland—purchased the business and assets of Rangers from the administrators Duff & Phelps. They also agreed to several conditions in order for the SFA to transfer Rangers’ membership of the SFA to Sevco Scotland (now The Rangers FC).
Amongst those conditions was that The Rangers FC would accept any punishment imposed as a result of the SPL investigation regarding the issue of improper registration of players.
Punishments could range from anything from a fine, to expulsion from the game. The thing that seems to worry “Rangers” more than anything though, is that SPL titles and Scottish Cups won between 2000-2011 could be stripped from the club.
This agreement has seen a belief emerge amongst Rangers fans and certain sections of the Scottish soccer press that they have been punished enough.
So let’s look at exactly how “Rangers,” and their supporters claim to have been punished:
1) 10 point deduction (season 2011-12)
2) £160,000 fine
3) 12 month transfer embargo
4) Relegation to Division 3 of the Scottish Football League
5) Loss of most of their squad from last season
6) Banned from UEFA competition for 3 years
It looks as if the Rangers FC has been heavily punished—does this belief stand up to scrutiny?
There are two things that must be considered when addressing this issue.
First—there is a big difference between “consequences” and “punishments.”
Secondly—we must consider which “Rangers” we are talking about. Is it Rangers FC, or The Rangers FC?
Let’s go through them in turn:
1) Rangers FC were deducted 10 points by the SPL when they entered administration on February 14 this year. The rules have changed since then, but in 2004, the SPL introduced a rule that 10 points would be deducted, and a transfer embargo imposed, on any club entering administration. So Rangers were not “punished” with a 10 point deduction, it was simply a consequence of entering administration.
2) An SFA judicial panel fined Rangers FC £160,000 in April 2012, after being found guilty of five charges of impropriety in their financial affairs, including failing to pay their taxes over a 12 month period. This is without a doubt a punishment.
3) The same SFA judicial panel imposed a 12 month transfer embargo on Rangers FC. Administrators Duff & Phelps challenged this in Scotland’s highest court, the Court of Session, as it was not on the list of sanctions available to the panel. The Court of Session upheld the appeal and ordered the issue to be returned for the judicial panel to select a punishment from those available. The 12 month transfer embargo was never imposed on Rangers FC. The Rangers FC has accepted the embargo.
4) Contrary to popular perception, The Rangers FC has not been relegated to Division 3 of the SPL. They have never before been a member of any league, and as a completely new club, applied to the SPL for membership. The SPL rejected the application, so The Rangers Football Club applied for membership of the Scottish Football League and as a brand new member, was placed in the bottom tier, Division 3. Relegation then, has not been a punishment imposed on “Rangers.”
5) “Rangers” has indeed lost a lot of players from last season’s expensive squad. Players such as captain Steven Davis, Steven Whittaker, Steven Naismith, Allan McGregor, Kyle Lafferty, Jamie Ness and Rhys McCabe have walked away from Rangers FC. These have not though, walked away from The Rangers FC, for whom none of them ever played. With Rangers FC consigned to liquidation, the players’ contracts were voided and they were free to sign for other clubs. Loss of players then, is not a punishment imposed on “Rangers.” It is simply a consequence of Rangers FC being liquidated.
6) The Rangers FC will not be able to compete in UEFA competition for at least three years. This though, is not a punishment, it is a simple fact. A UEFA license cannot be granted to any club who do not have three years’ worth of audited accounts. The Rangers FC was founded as Sevco Scotland on May 29 this year, so The Rangers FC is not “banned” from UEFA competition, they simply do not fulfil the criteria to enter any UEFA competitions.
So how has “Rangers” been punished so far? It amounts to a £160,000 fine on Rangers FC, and a 12 month transfer embargo on The Rangers FC.
Even the transfer embargo is not a punishment though. Accepting the transfer embargo was a condition of membership for The Rangers FC, and the SFA helpfully agreed to delay it until September 1, thereby enabling The Rangers FC to strengthen their squad before embarking on their great adventure through the lower leagues.
Let’s turn our attention now to the possible stripping of titles won by Rangers FC from 2000-2011, the sanction which The Rangers FC appears to be most concerned about.
Ally McCoist and Charles Green have pledged to fight any attempt to remove titles from Rangers FC historical record.
This is like Ben Johnson telling the IOC in 1988, “Hell no, you’re not having my medal back!”
If Rangers FC are found guilty of using improperly registered players from 2000-2011, then losing those titles will be a consequence of effectively cheating to win them.
Stripping titles from Rangers FC’s record will effectively have zero impact on The Rangers FC.
They should be far more concerned about what the real punishment could potentially be.
The SFA has shown not just a shocking lack of leadership in dealing with the “Rangers” crisis, but also an unwillingness to apply its own rules to The Rangers FC, who by rights should not have been granted membership of the SFA at all, as they do not meet the requirement for three years’ of audited accounts.
The SFA has deliberately fudged the issue of how they regard The Rangers FC. Is it the club founded in 1872 or not?
Of course The Rangers FC is not the club founded in 1872. That club remains in administration, is no longer a member of the SFA and will shortly be liquidated.
The SFA granted Sevco Scotland membership by allowing Rangers FC’s accounts to “count” towards their application (despite Rangers FC failing to produce audited accounts for last year).
The SFA transferred Rangers FC’s membership to The Rangers FC but have avoided the question of whether The Rangers FC can claim Rangers FC’s historical record.
The SFA has a responsibility to ensure the good governance (including financial governance) of the game in Scotland.
By allowing the fiction to develop that the “club” and “company” are separate, the SFA have created a situation whereby “clubs” are not responsible for the debts they accumulate.
Scottish clubs who cannot pay back their debt can now simply liquidate, sell their stadia to friendly businessmen, and enter the lowest tier of the SFL as the, “same” debt-free “club.”
By granting The Rangers FC membership, the SFA has set a very dangerous precedent. They have allowed “Rangers” to tell creditors that they are not the “company,” which owed them over £100m, but tell their supporters that they are the “same club” which profited on the pitch from the debt they have walked away from.
If the SFA recognise The Rangers FC as a club founded in 1872, then Scottish soccer clubs really will be free to run up astronomical debts, with no need ever to pay them back.
Who would provide new credit or banking facilities to any Scottish soccer club now?
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