The Scottish Football Association, in seeking to defend itself from allegations that it unfairly awarded Rangers a licence to play in Europe in 2011/2012, appears to have admitted that it withheld evidence from the Lord Nimmo Smith inquiry into rule breaking by the club in its use of tax avoidance schemes.
In 2013, a commission headed by Lord Nimmo Smith decided that sanctions should be imposed on Rangers in respect of tax avoidance schemes that involved the non-declaration of payments to players, contrary to the rules of the Scottish Football Association and the Scottish Premier League. The commission could have decided to impose a points penalty on Rangers, which would have meant the club lost titles. They did not, instead a fine was imposed.
The decision not to strip league titles was based on the finding that no advantage had accrued to Rangers, since any other club could in theory have conducted the same, legal schemes.
As we explained in our report “Doing SFA for fair play”, that judgement was clearly wrong on the facts. One of the tax avoidance schemes run by Rangers was unlawful and had been accepted as unlawful by both the club and HMRC before the start of the commission’s inquiry. The question remains, how did the commission get this so badly wrong?
Now, in a letter to Celtic shareholders, it appears that the SFA has admitted that at that time of the inquiry 2012 it was in possession of a letter from HMRC describing the behaviour of the club as ‘fraudulent’. But the SFA appears to have made no attempt to bring this to the attention of the inquiry, who continued on the basis that all of the Rangers tax avoidance schemes were lawful.
Two tax cases
Rewind to 2012. After the glory years under owner Sir David Murray and managers including Graeme Souness, Rangers’ overspending had finally caught up with it. Like Sir Philip Green with BHS a few year later, Murray sold the club for a pound to a relatively inexperienced buyer with a dubious track record. In Green’s case, mismanagement of the pension fund had created an ultimately existential threat to the company. In Murray’s case, that threat came from uncertainty over a tax liability arising from two tax avoidance schemes run during 1999-2011.
In the end Rangers went into administration as the tax avoidance schemes set up by Murray were attacked by HMRC and the club simply didn’t have the money to pay their tax bill.
There were two schemes operated by the club. The first scheme (the ‘Wee Tax Case’) was only uncovered when police investigating a separate allegation had taken documents from Ibrox Stadium. In May 2011, HMRC wrote to the club in the strongest possible terms. Under the heading ‘Failure to operate PAYE 2000/01-2002/03: Decision letter’, the tax inspector set out a demand for £2.8 million, and wrote: ”I have decided to make the assessments as it is my view that the amounts reflected in the assessments arise due to the deliberate failure or fraudulent behaviour of the company” (emphasis added). Rangers did not end up contesting that assessment and admitted liability for the bill.
The second scheme (the ‘Big Tax Case’) ran from 2002, and has been the subject of multiple court findings and appeals. As things stand, HMRC is victorious, with the Court of Session having deemed the scheme also unlawful. The Supreme Court is considering whether to hear an appeal, however. More importantly for the present issue, at the time of the Lord Nimmo Smith inquiry a specialist tax court had found in favour of Rangers. On that basis, the commission wrote that the scheme was not unlawful.
The commission decision not to consider title-stripping turned on the following points. First, they considered the two schemes (or rather, the trusts through which they operated) together and stated they did not know of any difference between the two, not realising that one had already been declared unlawful and was therefore fundamentally different from the other.
Second, the commission ruled that other clubs could equally have used such schemes; that there was therefore no sporting advantage to Rangers; and so the commission do not consider sanctions ‘of a sporting nature’ such as reversing results.
Tied up in knots
In our report we showed how Campbell Ogilvie, the then President of the Scottish Football Association, and the only person to give evidence in person on the tax avoidance schemes had originally set up one of the companies that was used to operate a tax avoidance scheme in favour of Craig Moore. That scheme was the same ‘Discounted Options Scheme’ that was later found to be unlawful in the case of two other players, although HMRC did not pursue the Craig Moore case. This evidence seemed to directly contradict Mr Ogilvie’s own claim to the inquiry that he had ‘nothing to do’ with the tax avoidance schemes used by the club. Mr Ogilvie has never responded to repeated requests for comment.
The report also dealt with a second issue, that was the granting of a licence by the Scottish Football Association to Rangers to play European Football in the 2011/2012 season despite the fact that UEFA rules require clubs to be up to date with tax payments.
The assumption of many has been that the club misled the SFA about the nature of the ‘Wee Tax Case’ in order to get their licence, not telling them about they had admitted liability for the bill (again, the SFA chose not to answer repeated requests for comment in advance of the publication of the report).
However, in order to defend their position, the SFA appears to have inadvertently admitted that they in fact withheld evidence from the Nimmo Smith inquiry.
Following the publication of the Offshore Game report earlier this year the SFA told David Conn that the federation was well aware of the ‘Wee Tax Case’ and was in fact in possession of further documentation that showed that the club had been given time to pay by HMRC, which meant that the club would be allowed to play in Europe under UEFA rules (that explanation in itself is suspicious, given further evidence available to the report writers, but is not the subject of this article).
The problem was that in the end, Rangers never did pay, and HMRC pursued the club for repayment through the courts, which was a significant cause of the club’s later bankruptcy proceedings which triggered the Nimmo Smith commission.
This raises the question, if the SFA knew all about the “Wee Tax Case”, and in fact had even more documentation about it than anyone else has seen, why did they not alert the Nimmo Smith commission to this?
Now, the SFA have been digging further. Writing to representatives of Celtic shareholders about the process of awarding Rangers a licence for European football in 2011-12, SFA chief operating officer Andrew McKinlay appears to have admitted that not only did the SFA know about the ‘Wee Tax Case’, but they had the 20 May 2011 letter from HMRC to Rangers in their possession before the Lord Nimmo Smith commission began its work. That is the same letter which described the club’s behaviour as fraudulent.
The correspondence from the shareholders to the SFA included a copy of the May 20th letter and in his response to lawyers representing the shareholders Mr McKinlay says:
“Even if the information that your clients have brought to our attention was not before us in 2011, and we do not accept that, it is arguable that the process for that season has been completed and is closed on the basis of the information provided by the licensee club”
The Offshore Game contacted the SFA repeatedly over the last week to seek specific clarification on this point. The SFA spokesperson repeatedly acknowledged the question, but has failed to provide any response.
A failure of governance
Today, Celtic will respond to shareholders at their AGM who believe the time has come to ask the UEFA, the European football authority to intervene in the licensing issue, but the matter of what to do about the failings of the original inquiry will be left unresolved.
This points to one of the many governance failures of football. Who can hold the football authorities to account? If a football association cannot be trusted to ensure fair play over issues as fundamental as the awarding of league titles, and investigating allegations of foul play, fans may as well give up and watch the wrestling instead.
With the parliamentary Culture, Media and Sport select committee now firmly focused on football governance, this could finally be the time for a long overdue, external intervention.