Part 3: 30 June 2011 – 30 September 2011

Previous: Part 2

 

UEFA monitoring and HMRC lose patience

 

  1. 30 June 2011. This date marks the first of two monitoring points in the UEFA Licencing cycle, where any changes to the status of “overdue payables” or other significant economic factors should be advised to the football authorities. It is unlikely that a previous licence award would be revoked, but such a disclosure would likely prompt further scrutiny, or controls, to be put in place for the future.

RFC’s claims of what they called a “potential” liability at the time of the licence award had, by 30 June 2011, become ”status of postponed (awaiting scheduling of payments)”, according to an internal RFC email.

Source: Internal email from the RFC Financial Controller to Craig Whyte in Ref12

 

If the liability was described in that way on the submission to UEFA under Art 66, then it had to be a false statement. We know that from several sources, the acceptance of the liability in February/March, the issuance of formal assessments in May, the expiry of the appeal period, MCR’s proposal to make a small payment on account and HMRC’s referral of the case to their “Collector of Taxes” all in June.

 

While the submission is apparently a “self certification” procedure, the SFA appears not to have investigated further, or sought confirmation from HMRC as to the status of the tax liability. If the SFA deliberately chose not to ask, or was advised not to ask, what might be termed “awkward questions”, then they were at best negligent in terms of their responsibilities to other clubs, or at worst conspired with the club to cover up the true status of the tax liability.

 

  1. 1 July 2011. HMRC wrote to the RFC Company Secretary, advising that, in the absence of any payment, an appropriate “penalty” was being considered and that HMRC would meet with MCR on 14 July 2011 to discuss the issue.
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 37 of Ref4b.

 

  1. 14 July 2011. HMRC’s “Head of Enforcement & Insolvency, Debt Management and Banking” met with MCR and followed up the meeting with a letter to MCR, with multiple demands for more financial information, both historical and forecast. The demands include payment of the £250,000 transfer fee received from Blackpool for Charlie Adam. HMRC made it clear that they were seeking payment in full , including interest and penalties, during August
Source: Letter from the Head of Enforcement to MCR  dated 14 July 2011

 

  1. 21 July 2011. HMRC emails MCR querying transfer spending on signing Lee Wallace while the debt to HMRC remains outstanding.
Source: Email from HMRC to  MCR dated 21st July 2011

 

  1. 28 July 2011. HMRC holds a conference call with MCR. An email chain, internal to RFC, follows, with MCR’s summary of the key points from the meeting. Note HMRC recognise the dependence of obtaining full settlement on a favourable result in the Champions League v Malmo on 3 August.
    • 60% penalty to be applied taking total to £4.2m
    • Late appeal likely to be viewed as vexatious
    • Penalty can be appealed within 14 days
    • HMRC’s interest in the outcome of the Champions League qualifier
    • Summary warrant to be obtained.
Source: Email chain in Ref13.

 

  1. 1 August 2011. HMRC initiate summary warrant proceedings at Glasgow Sheriff Court.
Source: Documents included in the Inventory of Productions contained within Ref11.

 

  1. 3 August 2011. Rangers lose to Malmo FF in their Champions League qualifier, thus denying the club access to a significant revenue stream.

 

  1. 4 August 2011. HMRC holds another conference call with MCR. An email chain, internal to RFC, follows, with MCR’s summary of the key points from the meeting.
    • Cash shortage from September without European income
    • No provision for £4.2m liability in cash flow forecast
    • Advised of summary warrant proceedings underway
    • PAYE Audit to be undertaken
 Source: Email chain in Dated 4 August 2011

 

  1. 10 August 2011. Sherriff Officers call at Ibrox to serve papers and collect payment of an overdue tax liability of £3.02m.
Source: Documents included in the Inventory of Productions contained within Ref11.

 

  1. 10 August 2011. The visit of the Sherriff Officers prompted the RFC directors to look at ways to challenge or stop the effects of the summary warrant.
Source: Two email chains involving Gary Withey, RFC’s Company Secretary, MCR and a third party legal firm. First e mail  and Second E mail .

 

  1. 14 August 2011. MCR emails Craig Whyte suggesting an immediate payment of £250,000 to HMRC and to seek a 3 year time to pay arrangement to nullify the effects of the summary warrant.
Source: MCR email to Craig Whyte   dated 14 August 2011

 

  1. 16 August 2011. HMRC write to RFC, formally advising that a penalty of £1,299,347 had been levied on the balance due in respect of the tax liability.
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 38 of Ref4b.

 

  1. 22 August 2011. HMRC meet again with RFC and MCR. Phil Betts, RFC Director, is unable to answer questions on the club’s current position and the failure to address the tax liability. HMRC initiated discussions on the penalty applied and various options that could be taken.

 

A few days later, in an email to Gary Withey, dated 26 August 2011, Betts referenced a comment made by HMRC at the meeting, that “in his opinion what the previous regime had allowed to happen was tantamount to fraud.

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 39 of Ref4b. Email from Phil Betts to Gary Withey dated 26 August 2011 Ref 14a.

 

  1. 25 August 2011. Rangers lose to Maribor in their Europa League play off, thus closing the door to any further revenue stream for participation in European competition.

 

  1. 26 August 2011. RFC’s attempts to find a way out of their immediate difficulties continue. Gary Withey writes to HMRC stating that their letter with assessments, dated 20 May 2011, was not seen by RFC, as the Financial Controller, Donald McIntyre, had been suspended around that date. Withey was clearly unaware that MCR had acknowledged receipt of that letter in their own letter to HMRC of dated 6 June 2011.
Source: Email from Gary Withey to HMRC in Ref14

 

  1. 30 August 2011 HMRC’s Head of Enforcement writes to the RFC Company Secretary, stating the arrears position (£3,024,054.52) and that interest was accruing at £163.83 each day. He goes on to comment that “promises to pay so far have not been delivered on” and adds that he had “provided instructions for legal action to commence”
Source: Letter from HMRC to RFC  dated 30 August 2011

 

  1. 2 September 2011 HMRC is successful in obtaining an arrestment of “a seven figure sum” in respect of the tax liability held in RFC’s accounts with the Bank of Scotland.
Source: Multiple media articles the following day, e.g. BBC Report.

 

  1. 14 September 2011 Saffray Champness, who had taken on the role of tax advisors to RFC, appealed the penalty applied by HMRC.
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 41 of Ref4b.

 

  1. 19 September 2011. Keith Sharp at the SFA emails Ken Olverman at RFC confirming “the good news” that UEFA had verbally accepted RFC’s submission regarding “overdue payables” as at 30 June, and that no update in respect of Future Financial Forecasts (5 months before Rangers entered administration) was required. However he goes on to ask, in the light of Media comment, what the current situation was with regard to the tax liability.

 Source: Email from the SFA to RFC dated 19 September 2011 at Ref15

 

The position taken by the SFA in this email is contradictory, to say the least. RFC’s “self–certified” submission at 30 June with a status of “postponed (awaiting scheduling of payments)” appears to have been verbally accepted by UEFA, so the SFA clearly had some verbal interaction with UEFA  in order to be able comment in the email in the terms above. The SFA had to have been aware of the visit of the Sheriff’s Officers in early August 2011, among all the other media commentary at the time, which no doubt prompted the question about the current status of the tax liability. There is no suggestion that the SFA had any concerns about the June 30 submission, but in contrast noted that it was unlikely that there would be any follow up action taken by UEFA. Why would UEFA consider taking action if the submission was in order?

 

The email is indicative to the SFA having knowledge by September 2011 of an issue relating to the tax liability, but exhibits a lack of intent to probe too deeply into the history of the case. It could be that there was no desire for either the SFA or UEFA to investigate the matter further, as Rangers had already exited both the Champions League and Europa League qualifying at an early stage, therefore there would be little value in seeking sanctions for an earlier inaccurate submission.

 

It is unclear what dialogue took place between the SFA and UEFA at each stage of the licensing process, but it does not take a huge leap to believe that the SFA was content not to confirm or investigate any of the submissions made by RFC.

 

28 September 2011 A draft response to the SFA’s request for a status update on their tax liability, in accordance with UEFA’s Article 67, is circulated among RFC officials. The draft claimed that £500,000 had already been paid towards the liability and that discussions on the arrangements to repay the balance were ongoing. Despite the club’s claim, there is no evidence of any sum having been paid towards the liability. Neither HMRC nor D&P make reference to any part payment ever having been received in their court submissions, or statutory reports.

  1. In the email chain that accompanied the draft, there is a reference to the SFA chasing up a response on 3 October 2011. In response Craig Whyte adds that “I have no problem with it in its present form”
Sources: Draft letter for signature by Craig Whyte dated XX September 2011 Ref16, Email chain between RFC officials dated from 28 September to 3 October 2011.

 

28 September 2011 Saffray Champness, sought to submit a late appeal against the assessments raised on 20 May 2011. This application was rejected by HMRC with full reasons provided by HMRC on 12 October 2011.

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 42 of Ref4b.

 

  1. 30th September 2011. This date represents the second of two monitoring points in the UEFA Licencing Cycle. The SFA’s request of 19 September 2011 prompted RFC officials to draft a response as noted above. However, RFC had not responded by 3 October, at which point the SFA chased an update. An email from Ken Olverman to the SFA dated 31 January 2012, in connection with the 2012/13 licensing round makes reference to his letter of 4 October 2011, suggesting that the response was sent on that date.
 Source: Email from Ken Olverman to the SFA stated 31 January 2012 in Ref17.

 

If what was ultimately sent to the SFA was in line with the draft then the claims made were plainly untrue. Nothing had been paid towards that liability. Since the previous monitoring point at 30 June 2011, RFC had been subject to a summary warrant and had a substantial sum arrested in their bank account. It is inconceivable that the SFA was unaware of the deteriorating financial status of the club (hence the “good news “ that no Future Financial Forecasts required), but apparently did nothing to either question or highlight the issue. Indeed they stated in their initial query In view of recent media reports, could you provide us with a brief written update of the current situation re the amount due to HMRC, as required under Article 67 of the UEFA Club Licensing and Financial Fair Play Regulations.”. On that basis, the SFA appears to have colluded with RFC cover up their failure to meet UEFA requirements or scrutinise their finances.

Next: Part 4 – (1 October 2011 – April 2012)