Archive for November, 2012

November 2012

Friday, November 9th, 2012

So, at last we have the Rangers EBT “big tax case” decision. And very interesting it is too. Rarely has something generated as much excitement in Glasgow’s accountancy firm kitchens as the fate of Rangers.

Naturally I stay well away from Rangers vs Celtic debate and having an English father I think that’s for the best really. (For the avoidance of doubt I both hope Celtic do well in the Champions league and that Rangers get back to the top flight pronto).

The remarkable thing is that if you read today’s papers you’d think that Glasgow Rangers were being held up as a shining example of a good corporate citizen who was being unfairly treated by HMRC. I think the reaction is a useful rebalancing after a few weeks of “bash a tax avoider” aimed at Amazon and Starbucks.

But let’s be clear, the use of EBTs was never about anything other than avoiding tax.

The Tribunal decision was simply to decide if the avoidance was effective in law. So, the good news for the Murray group and Rangers is that the Tribunal found on majority that most of the cash routed via the EBT was not subject to PAYE tax – there were genuine loans. So…all legal…no problem. But is that enough in today’s world?

I know a “day is a long time” in the eyes media …..but only a week or so ago I was watching people from some of the top international online retailers justifying to an MP in a televised enquiry why they don’t pay much UK tax. The public and media were baying for their blood…. “they’re scum” I heard a lady say…..”close down these “tax avoiders”. It’s serious hypocrisy for the media and public to criticise Starbucks yet argue that if the Rangers EBT were legal that’s just fine.

At least Starbucks and Amazon weren’t using EBTs – they paid their PAYE.

As for Rangers ….there appears to be an argument that Ranger’s wouldn’t be in their current mess if the Tribunal had opined earlier which would have “cleared it all up just fine”. I totally disagree.

The First Tier Tribunal is like the opening home game in a long tax litigation season.

I’m told HMRC made it clear to Rangers that if they didn’t win at any stage of the litigation process they would appeal the case onwards to the next level – that being the case (and I think it is true) then Rangers were never going to shake off the shadow of defeat – there was no hope of Rangers escaping the gloom of a “Potential £100m bill” etc. for many years to come and, as such, the club was not appealing to most purchasers and would have remained so until the final litigation in many years time..

As such, insolvency was probably inevitable without the presence of really very serious new investment (enough for the tax bill plus players etc). And there was no such investment about.

For Rangers, it’s not clear if HMRC will appeal yet – but if they do I am wondering if the liquidator would contest it and how that might be funded? Could HMRC appeal and have an empty goal to score against at the 2nd Tier or even Court of Session? It’d be like the opposition team not turning up -you know who’ll win.

In fact, with certain major investment banks allegedly having billions in EBTs the cynic in me wonders if Rangers were picked as a test case simply because HMRC knew there were limited funds about for defence.

So….is tax avoidance moral? Does it matter? Should tax advisers refuse to offer tax planning that may reduce tax bills if they think the planning is contrary to the intent of law? Where is the line? I’ve always favoured the view that the law should be certain and not subjective and that whilst I am a moral man, that each person should make their own judgement on that question and have no issue with tax planning provided those indulging understand the risks and effect of what they do.

It is totally wrong to see legitimate businesses hauled in front of MPs to be put in stocks and get pelted with rancid tomatoes. They should be investigated by HMRC who can then apply pressure through the use of current law to get more tax into the UK.

To go on a little more…that Rangers case….the decision is some 145 pages long. The two judges who decided in favour of Rangers wrote around 16 pages of explanation with their decision. It’s unusual for lawyers to be so brief when you consider the dissenting judge (Dr Poon – a Chartered Tax Adviser) chose to write over 80 pages, explaining the skeletons in the cupboard and explaining why she felt that the overall evidence pointed to the money paid via the EBT was “pay” not a “loan”. The majority prevails for the time being but having done my best to read the important pages and paragraphs I found some sympathy with Dr Poon’s conclusion even if I want to believe HMRC can be defeated in the end.

On another matter…..

The tax world has been busy enough. As we head towards 2013 I would urge you to look at our Autumn Newsletter and our “Real Time Information” update (“RTI”) on the right hand side of our website in Documents sections.

All employers need to start getting their payroll “cleaned up” for RTI asap as without accurate core data you’ll have a problem paying staff from next April.

We’re thinking of running some seminars on this topic – if you think that’s a good idea just email me on donald.parbrook@milnecraig.co.uk

And finally…. I really must write to you all about the Patent Box. For those of you who make things that have a patent within them somewhere there’s a real chance of a 10% tax rate in future years. More to follow!….

Also, for those affected, about the changes in gaming duty – e.g. pub operators with gambling machines – have a look at this URGENTLY – my guess is most know about it!

http://www.hmrc.gov.uk/machinegamesduty/
http://www.beerandpub.com/

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