Who On Earth Are ‘Newco Rangers’?
The door of the once-mighty Ibrox club has slammed shut leaving an array of legal, tax and contractual issues still to be resolved in its wake. Players moving elsewhere scot-free (excuse the pun), membership to the Scottish Football Association yet to be granted, and Scottish League clubs voting on the acceptance of Rangers’ replacement club into the League System. How exactly did such an illustrious club fall so suddenly into oblivion? And who exactly are ‘Newco Rangers’? Impact’s Shaun Gibbs makes sense of the Scottish football saga…
Fifty-three Scottish League Championships between 1981 and 2011, thirty-three Scottish Cup triumphs, twenty-seven Scottish League Cup successes and one UEFA Cup Winners’ Cup to their name – Scottish football’s most domestically-successful club (apologies, Celtic fans) now ceases to exist.
The causes of the demise developed under the 23-year ownership of Scottish businessman Sir David Murray. An Employee Benefit Trust (EBT), set up by his company Murray International Holdings (MIH), allowed employees to be benefited without incurring National Insurance Contributions. In this sense, individuals are able to receive cash advances subject to nominal tax exposure. The EBT allowed high earners across Rangers Football Club to be paid through an offshore trust by means of a long-term loan often with little or no income tax.
The Employee Benefit Trust scheme is perfectly legal. In fact, it is used regularly across the UK within several thousand firms. So where did Rangers go wrong? What formed the so-called ‘Big Tax Case’ at Rangers which rendered their scheme as a tax scam as opposed to a legal system of employee benefit payments, was the use of the EBT scheme to make payments on a contractual basis. Contractual payments constitute part of a salary and therefore are, or should be, subject to tax and national insurance.
The scheme was set up alongside the guidance and advice of one Paul Baxendale-Walker. The tax advisor, author of two books on EBT tax strategies and now involved in directing and indeed acting in the porn industry, claims he is not a sly, mischievous character (although the jury is well and truly out on that) and he should in no reckoning be the subject of blame for Rangers’ extensive debt. According to the ‘virtuous’ Mr Baxendale-Waker, somebody would have advised Rangers Football Club with reference to the principles in his book. Rangers however, accordingly, “went and did something else” – much like Mr Baxendale-Walker, then, after his lengthy involvement in tax…
HMRC subsequently opened up a tax evasion case against Rangers Football Club, claiming the scheme was a tax scam as it was contractual. Evidence gathered strongly suggested this to be the case. When documents, such as a letter from ex-director of Rangers, Martin Bain, to then-Chairman John McClelland in 2003 suggested “…any pay rise I got should be paid through the trust, obviously as a discretionary bonus as it cannot be contractual”, it was difficult for Rangers to uphold their innocence. During the existence of the trust, over fifty million pounds was paid into it, some of these loans over ten years old. The trust was widespread across Rangers, also being used to benefit playing and coaching staff. It is understood that not a single one of those loans has been repaid – a quite staggering debt to incur.
Liquidation prevailed for Rangers Football Club after entering administration in February, paving the way for the creation of the alternative ‘Newco Rangers’. A consortium led by Englishman Charles Green – Sevco 5088 – bought the clubs assets, including the training facilities, and the renowned Ibrox Stadium. So what now for Newco?
After the remaining SPL clubs voted against allowing Newco Rangers to take the old Rangers’ place in the Scottish Football League System, the integration of Newco Rangers into the league system was left in the balance with their fate to be decided – of all possible dates – on Friday the 13th July. As expected, the once-giants of Scottish football will find themselves travelling to grounds such as Borough Briggs, facing the likes of Elgin City, in the Scottish Third Division. Somewhere, some crazy, probably die-hard Celtic fan is making his way to the bookies to pick up a healthy sum of money after placing an outrageous bet on Rangers’ plummeting as low as the Third division a few years back. You never know…
The death of Rangers and the failed incorporation of Newco Rangers have been greeted with great concern with many stakeholders in Scottish football. Stewart Regan, chief executive of the Scottish FA, warned ‘the beautiful game’ faces a “slow lingering death” in Scotland should Rangers be denied incorporation into the Scottish First Division for the forthcoming season. Neil Lennon, manager of major Glaswegian rivals Celtic FC, has also admitted Celtic will suffer financially as a direct consequence of Rangers’ collapse. With a league system already ridiculed with criticism for its standard of competition, it is reasonable to sense further decline of the sport in Scotland.
And what of the players previously contracted to Rangers FC? Although Charles Green and his company have vowed to “seek damages for breach of contract and for inducement to break contracts”, many of the clubs’ players refused to transfer their contracts to the Newco version of Rangers FC, making them free to join new clubs on a free transfer. Whilst Green is adamant he shall seek to take legal action to block these moves, it would appear he is powerless to repel the players’ exit from Ibrox. Kyle Lafferty and Steven Whittaker have left to join FC Sion and Norwich City respectively, whilst Steven Naismith has teamed up with ex-Rangers’ striker Nikica Jelavi at Everton. Whilst some select members of the Rangers playing staff, such as Lee Wallace and Lee McCulloch have agreed to directly transfer their contracts to Newco Rangers, the future of many at Newco, such as midfielder Maurice Edu, hangs in the balance with their league existence yet to be set. What is certain, however, is that difficult times are set to continue not just for the huge and dedicated fan base of the old Rangers FC, but for all associated with Scottish Football.