HMRC Win the Scottish Court of Session which ruled against Murray Group Holdings, the company then behind Rangers Football Club.

HMRC believe that RFC 2012 (formally The Rangers Football Club plc) had entered the arrangement to avoid income tax under PAYE and National Insurance in respect of payments to employees.

The arrangement was set up in a way that the employer company would make a payment in respect of the employee to the employee’s remuneration trust, who would then resettle the amount with a sub-trust for the benefit of the employee’s family. The employee would not be a beneficiary of the sub-trust, however, the sub-trust would then make a loan to the employee.

The First Tier Tribunal (FTT) held that the arrangement worked. They concluded that the loans were a genuine legal event and the employee’s did not have a legal right to the monies.

The Upper Tier Tribunal (UTT) upheld the FTT’s decision and rejected further HMRC arguments.

However, HMRC decided to appeal to the Court of Session and, to the surprise of many, HMRC won this round. It is almost certain that Murray Group Holdings will appeal and take the case to the final round, the Supreme Court to continue this saga.

This case is referred to as the Big Tax case in regards to Employment Benefit Trusts (EBT’s). HMRC argued on the redirection of earnings principle, although the employee is not paid directly it is as a result of the provision of their services to the employer that the trust is being paid.

The court decided the payments to the trust form part of the employment package to the employee’s and therefore was classed as income and subject to PAYE and National Insurance.

HMRC have made it clear by mentioning the many that have already settled, that they intend on perusing their current strategy and hope that victory at the Supreme Court would pave the way for Accelerated Payment Notices (APN’s) to be issued to similar EBT arrangements.

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