Rangers administrators blame HMRC penalties for £4m tax bill increase

Rangers: The club's tax debt has risen by £4m.SNS Group

Rangers administrators claim the club’s tax bill has increased by £4m because of interest and penalties added by the authorities.

According to a report released earlier this month, the Ibrox club now owe HM Revenue and Customs (HMRC) an estimated £18.3m for non-payment of VAT and PAYE in the nine months following Craig Whyte's May 2011 takeover.

The penalties have added £4m to the tax debt originally specified as £14.3m in Duff and Phelps's statement to creditors released in April.

Mr Whyte deducted the tax from employees' wages but did not hand it over to HMRC, instead using it as a source of working capital at Ibrox.

On Thursday, a spokesman for the administrators claimed that the increase in the club's tax liability was not the result of any failure to pay PAYE or VAT since they were appointed on February 14.

The administrators also said the figure had risen as a result of "new information coming to light" which differed from what the club's owners had given them.

The spokesman said: "The £14.3m figure was Duff and Phelps’ calculations based on the information provided to them by the club at the time.

"The £18.3m takes into account HMRC’s full claim as creditors apart from both the big and wee tax cases.

"A substantial part of that increase is down to penalties and interest being added by HMRC for non-payment. It is also to do with new information coming to light in its claim, which differed from the information provided by the club to the administrators initially."

The administrator’s spokesman said "all tax has been paid on behalf of Rangers since their appointment on February 14" and stated the increase was not in relation to new debts built up since the insolvency firm was appointed.

When administrators were called in earlier this year, the HMRC debt was estimated at £9m by the administrators. But this rose to £14m in Duff and Phelps' first report to creditors the following month,

Rangers owe HMRC around £3m for the 'wee' tax case, which centres on the club’s use of a discounted options scheme to pay players Tore Andre Flo and Ronald de Boer from 2000 to 2003.

The club is also awaiting the first tier tribunal’s decision on the 'big' tax case, in which Rangers are appealing against HMRC’s decision that the way they used offshore employee benefit trusts (EBTs) breached tax law. Under Sir David Murray’s ownership the club paid part of the salaries of staff and players using loans from the trusts between 2001 and 2010.

The use of such trusts was not illegal, but the way in which Rangers deployed them to pay wages found them in breach of the rules according to HMRC. Legislation introduced last March was designed to clampdown on the schemes by imposing tax-charges on loans from the trusts.

According to administrators, Rangers could face a tax bill of up to £75m if they are unsuccessful in the tax tribunal case, which concluded hearing evidence in January and is still to report its findings over the use of EBTs.

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