Rangers tax scheme kicked into touch
There has been a long running tax case rumbling through the lower courts on the use of a device called an Employee Benefit Trust (EBT) by Glasgow Rangers Plc. HMRC have considered the use of the EBT a scheme to avoid PAYE and NIC.
The case has now been considered by the Law Lords in the Supreme Court, who decisively ruled in favour of HMRC.
An EBT collects payments from employers and makes these available to employees as a loan – this process means that funds are made available, in the Rangers’ case to players, without a charge to tax or NIC.
Whilst it was acknowledged that the individual processes in the set up and management of the EBT were carefully drawn to keep within current legislation, the overall strategy was the avoidance of tax and NIC. In their judgement, the Supreme Court judges were satisfied that this “purposive” approach, the purpose for which the EBT had been created, was the avoidance of PAYE and NIC and therefore they dismissed Glasgow Rangers Plc’s appeal.
A growing number of cases, where HMRC had challenged the use of EBTs by other concerns, will now be pursued by HMRC based on this judgement. This decision probably marks the end of the EBT as a legitimate tax planning device.
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