Part 2: 5 May 2011 – 6 June 2011

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Part 2 – 5 May 2011- 6 June 2011

 

The takeover and HMRC enforcement

 

The first part of the timeline dealt with HMRC’s establishment of a liability, RFC’s acceptance of that liability, and the SFA’s grant of a UEFA Licence to RFC for season 2011/12. This section takes the matter forward through the sale of the club and its takeover by Craig Whyte, while HMRC initiated procedures to collect the taxes that remained unpaid.

 

  1. 5 May 2011. HMRC write to MIH with an offer of settlement for signature by RFC with a deadline of 16 May  2011. The amount is the same as that agreed on 21 March 2011. The letter confirms that the writer had advised Donald McIntyre, RFC Financial Director, that he saw no grounds for appeal as the liability was accepted. It is also clear that HMRC did not wish the matter to “drift” any further.

 

David Horne of MIH, subsequently informed the HM Inspector of Taxes that, following the takeover by Wavetower, all correspondence and discussions regarding the DOS liability would be dealt with by RFC and that their Finance Director Mr McIntyre would contact him directly

Sources: Letter from HMRC dated 5 May 2011 of Ref9, and the Witness statement by an HM Inspector of Taxes, to an action at the High Court of Justice in London, dated 21 March 2012, at paras 23 and 24 of Ref4b.

 

  1. 5 May 2011 Apparently unaware of HMRC’s letter to MIH on the same date, Donald McIntyre emails HMRC, seeking to facilitate a meeting with the “new owner” and provide an update on the takeover.
Source: Email from Donald McIntyre to HMRC dated 5 May 2011 of Ref10

 

HMRC’s letter and McIntyre’s email reference to “our discussion of 21 March” suggests that there had been no correspondence between the parties following the 21 March meeting and, by implication, no agreement by the Bank to pay the liability had been forthcoming in the intervening period. That would preclude the existence of any written agreement to extend payment deadline having been signed prior to the licence cut-off date of 31 March 2011, which would have complied with UEFA requirements on “overdue payables”

 

  1. 6 May 2011 The takeover of RFC by Wavetower Limited (Craig Whyte’s holding company) is completed. The Share Purchase Agreement (SPA), in its definitions, includes a reference to Tax Liability means the liability of the Company in respect of  the discount option scheme associated with player contributions between 1999 and 2003 assessed at £2,827,801;”

 

The SPA also contains an undertaking at 6.7 that Wavetower’s solicitors, Collyer Bristow, would hold the above sum for the sole purpose of paying the Tax Liability”, until requested by the club.

Sources: The Share Purchase agreement at paras 1.1 and 6.7 dated 6th May 2011 and the Witness statement by an HM Inspector of Taxes, to an action at the High Court of Justice in London, dated 21 March 2012, at paras 26 to 29 of Ref4b.

 

  1. 9 May 2011 Craig Whyte engages financial advisors, MCR Business Consulting (later to be taken over by Duff & Phelps), to assist with financial planning and forecasting. A specific piece of work identified was to liaise with HMRC about the DOS tax liability and prepare time to pay proposals.
Source: MCR offer of service document, sent to Craig Whyte,  dated 9th May 2011

 

  1. 11 May 2011 HMRC met with RFC’s advisors, MCR, and advised them of the up to date position, emphasising again that HMRC would not let the matter drift. This meeting was followed up with a letter to MCR and copied to RFC, repeating the “no drift” position and the likelihood of penalty loading in the absence of a payment on account.
Source: Witness statement by an HM Inspector of Taxes, to an action at the High Court of Justice in London, dated 21 March 2012, at paras 30 and 31 of Ref4b.

 

  1. 16 May 2011 HMRC write to RFC. The contents of this letter are not known, but it demonstrates that HMRC was actively pursuing the matter.
Source: The letter was referenced in HMRC’s subsequent letter to RFC dated 20th May 2011, one of the inventory of documents contained within Ref11.

 

 

  1. 20 May 2011 In the absence of any response from RFC or MCR, HMRC took a decision to send formal Regulation 80 determinations and Section 8 decisions, (thereafter called assessments) to RFC. The amount, including interest, was as agreed with club officials on 21 March 2011. HMRC also expressed the view that “evidence of Fraud or Neglect” justified assessments being made beyond the normal six year limit.
Sources: Letter and enclosures from HMRC to RFC dated 20 May 2011, one of the inventory of productions contained within Ref11. Witness statement by an HM Inspector of Taxes, to an action at the High Court of Justice in London, dated 21 March 2012, at paras 32 and 33 of Ref4b

 

The two HMRC letters dated 5 May and 20 May 2011 clearly show that the tax liability could not be described as still being “potential” at those dates. Therefore, had RFC’s description of the liability as “potential” actually been correct at 31 March 2011, then it remained incumbent on them to advise the SFA immediately in writing of the significant change of status under UEFA article 56

 

  1. 26 May 2011. On completion of the 2010/11 football season, the SFA submit their final list of clubs, qualified and cleared to compete in UEFA competitions in season 2011/12, to UEFA.
Source: Andrea Traverso, UEFA Head of Club Licensing, letter in response to the Resolution 12 solicitors, dated 8 June 2016 Ref39

 

  1. 31 May 2011. (one source gives alternative date of 1 June 2011) HMRC meet with MCR again. MCR acknowledged that there was no opportunity to appeal following the legal advice received three months previously. It is likely that this meeting prompted the proposals made in a letter from MCR to HMRC dated 6 June 2011 (see below)
Source: Witness statement by an HM Inspector of Taxes, to an action at the High Court of Justice in London, dated 21 March 2012, at para 35 of Ref4b. The meeting is also referenced in a letter from MCR to HMRC  dated 6 June 2011 .

 

  1. 3 June 2011. Craig Whyte issues a circular on behalf of “The Rangers Football Club Group Limited” (formerly called Wavetower Limited) to RFC shareholders, providing them with information on the takeover and future commitments. One of those commitments is specified as

“The Rangers FC Group is to contribute to the Club the amount required to meet a liability owed by the Club to HM Revenue & Customs in relation to a discounted option scheme tax;”

Source: Circular issued by Craig Whyte, dated 3 June 2011, in Part III (e) of  Circular To Shareholders

 

6 June 2011. MCR writes to HMRC, providing them with some background financial information and cashflow forecasts. A proposal to make an interim payment of £200,000, on account, in respect of the tax liability is included, along with an intention of making a formal proposal regarding payment of the balance by 17 June 2011.

Source: Letter from MCR to HMRC  dated 6 June 2011  at paras 4.5 to 4.7

 

  1. 14 June 2011. Ken Olverman, Financial Controller at RFC, emails Craig Whyte confirming “I now have access to the UEFA Licensing Template which is a self certification process that we have no overdue Football Payables at the end of June.” It’s notable that he mentions “football payables” but not “social tax payables, but also that the submission is a self certification process.
Source: Email from Olverman to Whyte  dated 14 June 2011

 

NB: The above demonstrates that “good faith” is required on the part of the licensee, that their submission is accurate and truthful. See entry at 30 June 2011 below.

 

  1. 15 June 2011. Ken Olverman, Financial Controller at RFC presents the latest Management Accounts to the RFC Board. There are several references to the DOS liability, including the meeting with MCR and HMRC on 11 May, an indication that the £2.8m liability would not be paid before the financial year end (30 June), that any payment on account might reduce the penalty loading applied by HMRC, and that MCR’s desire was to wrap the DOS Liability in with any liability arising from the Remuneration Trust tribunal (big tax case).
Source: RFC Management Accounts  dated 15 June 2011 , Executive Summary at p2  and Other Matters (Tax) at p10 .

 

 

  1. 20 June 2011. HMRC referred the case and assessments issued on 20 May 2011 to their “Collector of Taxes” team, in the absence of any appeal or payment, following the expiry of the permitted 30 day period.
Source: Witness statement by an HM Inspector of Taxes, to an action at the High Court of Justice in London, dated 21 March 2012, at para 34 of Ref4b

 

 Next: Part 3: (30 June 2011 – 30 September 2011)