Comment on On Grounds for Judicial Review by HirsutePursuit.
Just to add to Auldheid’s earlier post:
LNS concluded that…
It is the board of directors of Oldco as a company, as distinct from the football management or players of Rangers FC as a club, which appears to us to bear the responsibility for the breaches of the relevant rules. All the breaches which we have found were therefore clearly committed by Oldco. We see no room or need for separate findings of breaches by Rangers FC, which was not a separate legal entity and was then part (although clearly in football and financial terms the key part) of the undertaking of Oldco. Rangers FC is of course now owned and operated by Newco, which bears no responsibility for the matters with which we are concerned. For the reasons already given, we have decided against the imposition of a sporting sanction. In these circumstances the financial penalty lies only upon Oldco and does not affect Rangers FC as a football club under its new ownership.
They could come to this outcome because they defined Rangers FC as:
Rangers Football Club, Ibrox Stadium, 150 Edmiston Drive, Glasgow, G51 2XD
The Rangers Football Club Plc (now known as RFC 2012 Plc (in liquidation) and referred to in the decision as “Oldco”), the owner and operator of Rangers Football Club (“Rangers FC”)
The rules of the SPL in 2012 stated:
Club means a Football club, other than a Candidate Club, which is, for the time being, eligible to participate in the League and, except where the context otherwise requires, includes the owner and operator of such club;
The issues under discussion were described thus:
Issue 1: period from 23 November 2000 to 21 May 2002 The only Rule referred to in Issue 1 is SPL Rule D10.2.3, in effect prior to 23 May 2005. This provided:“The Contract of Service between the Player and the Club shall state the Player’s full financial entitlement from the Club, including signing-on fees, additional lump sum payments, remuneration, bonus payments, removal assistance and benefits in kind. In any dispute between the Player and the Club, the remuneration contained in the Contract of Service shall be deemed to be the Player’s complete entitlement. Any Club failing to detail a Player’s full financial entitlement in the Contract of Service shall be dealt with as the Board may decide.”
Issue 2: period from 22 May 2002 to 22 May 2005 The Rules referred to in Issue 2 are SPL Rule D10.2.3, SPL Rule A7.1, SFA Article 12.3, SFA Procedures Rule 2.2.1 and SFA Procedures Rule 4. SPL Rule A7.1 and SPL Rule D10.2.3 are quoted above.
 SFA Article 12.3, in effect from and including 22 May 2002 provides: “Furthermore, all payments, whether made by the club or otherwise, which are to be made to a player solely relating to his playing activities must be fully recorded within the relevant written agreement with the player prior to submission to the Scottish FA and/or the recognised football body of which his Club is in membership.”
 SFA Procedures Rule 2.2.1, in effect from and including the season 2002/03, provides:“Unless lodged in accordance with Procedures Rule 2.13 a Non-Recreational Contract Player Registration Form will not be valid unless it is accompanied by the contract entered into between the club concerned and the player stating all the terms and conditions in conformity with the Procedures Rule 4.”
 SFA Procedures Rule 4, in effect from and including the season 2002/03, provides:“All payments to be made to a player relating to his playing activities must be clearly recorded upon the relevant contract and/or agreement. No payments for his playing activities may be made to a player via a third party.”
Issue 3: period from 23 May 2005 to 3 May 2011 The Rules referred to in Issue 3 are SPL Rule D9.3, SPL Rule D1.13, SPL Rule A7.1 SFA Article 12.3, SFA Procedures Rule 2.2.1 and SFA Procedures Rule 4. (Issue 3(c) also refers to SPL Rule D1.11, which we discuss below under a separate heading.) SPL Rule A7.1, SFA Article 12.3, SFA Procedures Rule 2.2.1 and SFA Procedures Rule 4 are quoted above.
 SPL Rule D9.3, in effect from and including 23 May 2005, provides:“No Player may receive any payment of any description from or on behalf of a Club in respect of that Player’s participation in Association Football or in an activity connected with Association Football, other than in reimbursement of expenses actually incurred or to be actually incurred in playing or training for that Club, unless such payment is made in accordance with a Contract of Service between that Club and the Player concerned.”
SPL Rule D1.13, in effect from and including 23 May 2005 provides:“A Club must, as a condition of Registration and for a Player to be eligible to Play in Official Matches, deliver the executed originals of all Contracts of Service and amendments and/or extensions to Contracts of Service and all other agreements providing for payment, other than for reimbursement of expenses actually incurred, between that Club and Player, to the Secretary [of the SPL], within fourteen days of such Contract of Service or other agreement being entered into, amended and/or, as the case may be, extended.”
So, to bring this all together. The construct that separated Club (with a capital C) from its ‘owner & operator’ was used to find the operating company in breach and find that there was ‘…no room or need for separate findings of breaches by Rangers FC, which was not a separate legal entity and was then part (although clearly in football and financial terms the key part) of the undertaking of Oldco.’
The problem with this interpretation is that issues 1 and 2 relate to periods before the rules and articles were amended to allow that construction.
Prior to 23rd of May 2005, there was no ‘owner and operator’ to be in breach of the rules.
The only determination LNS was entitled to make in relation to issues 1 and 2 was in relation to the club. It refused to do so on the grounds that the club’s ‘owner & operator’ bore responsibility for the rule breaches.
LNS had no locus whatsoever to consider Rangers FC as a separate entity from Rangers PLC prior to May 2005. It seriously misdirected itself in doing so.
NB For the avoidance of doubt, I do believe the later construction is correct. I am simply pointing out that it did not exist until 2005.
HirsutePursuit Also Commented
On Grounds for Judicial Review
From a legal point of view, the Rangers trademarks were purchased by Sevco, so it is perfectly entitled to use the name.
It’s only a phoenix if the same directors are involved in oldco and newco. Charles Green was never a director of oldco.
Not sure why you think ‘The’ Rangers is a different name from the original club. Before it was renamed to RFC2012 PLC it was ‘The Rangers Football Club PLC’.
The new club is using exactly the same trading name and trademarks as the old one did.
On Grounds for Judicial Review
In the 2004 – 2005 season there were 12 members of the Scottish Premier League Ltd.
Every member of the company – its clubs (lower case) – received minutes of each SPL board meeting.
When the company’s articles of association were altered in 2005 (twice) by votes at general meetings, each member will have clearly understood the purpose of those changes through the earlier board minutes they will have received.
There are eleven current football clubs – Aberdeen, Celtic, Dundee, Dundee Utd, Dunfermline, Hearts, Hibs, Inverness, Kilmarnock, Livingston and Motherwell – who will have filed away in their company records, SPL board minutes which provide a clear explanation of why the 2005 articles of association changes were introduced.
BDO may also have a copy of the minutes that would have been available to the original Rangers.
If the SPL board’s intention was really to introduce the idea of a Club as a footballing franchise – as presented by Doncaster/McKenzie to LNS – then there should be a clear document trail leading to that outcome.
Can any one of the eleven clubs (lower case) listed above provide copies of the minutes of SPL board meetings when the changes to the articles were discussed?
It won’t prove that Sevco Scotland are Rangers FC – but it might show that they both operated the same franchise.
Alternatively, it might just show that LNS was fed a heap of horseshit.
The period prior to 2005 is already beyond the time when the notion of Club (with a capital C) and ‘owner & operator’ existed. That part of the LNS judgement is already (IMO) bound to be set aside if challenged – since the entities that were under investigation, did not actually exist in the forms defined by the terms of reference.
If the Doncaster/McKenzie franchise construction cannot be supported by the SPL minutes from 2004/05 then the entire LNS commission will be shown to have been based on a falsehood.
Do any of the eleven clubs (lower case) listed above have an interest in making the SPL minutes available to those seeking a review of LNS?
Has anyone asked to see those minutes?
On Grounds for Judicial Review
According to the articles, a Club is the ‘undertaking of a football club’.
‘Undertaking’ should (according to the SPL/SPFL articles) be given the meaning ascribed to it in the Companies Act.
A Club is therefore, depending on its form, the corporate body or unincorporated association that constitutes a football club that plays its football in the SPL/SPFL.
In other words a Club is simply a club that is playing in the SPL/SPFL.
Honestly, it really is that simple.
Recent Comments by HirsutePursuit
…Any tax charged by any assessment…
To Comply or not to Comply ?
Does this help clarify matters?
Part IXInterest on Overdue Tax
86 Interest on overdue tax(1)Any tax charged by any assessment to which this subsection applies shall carry interest at the prescribed rate from the date when the tax becomes due and payable until payment. This subsection applies to—
(a)any assessment to income tax made under Schedule A or Schedule D,
(b)any assessment to surtax,
(c)any assessment to capital gains tax,
(d)any assessment to corporation tax.
(2)Where any tax is paid not later than two months from the date on which it becomes due and payable, the interest thereon under this section shall be remitted. As respects tax becoming due and payable before 1st July 1968 this subsection has effect with the substitution of
“three months”for ” two months “.
(3)Interest shall not be payable under this section on the tax charged by any assessment unless—
(a)the total tax charged by that assessment exceeds £1,000, and
(b)the total amount of the interest exceeds £5,
so, however, that in the case of tax becoming due and payable before 19th April 1967, paragraph (b) above has effect with the substitution of
“£1”for ” £5 “.
(4)Interest shall not be deemed to have begun to run under this section from any date before 1st January 1948.
Again, I may be missing something here, but the heading to this section seems to be a clue to whether an assessment treats the tax as ‘overdue’ or not.
To Comply or not to Comply ?
Thank you for the response to my questions the other day. Apologies, I have been not been able to give you my own thoughts before now. Real life often gets in the way.
I should say that, as things stand (on what I know now), I take the fairly firm view that Rangers should not have been granted a Club Licence for season 2011/12. However, my mind is not closed to the possibility that I have misunderstood or do not have sight of some important aspect of the matter. I am always open to be persuaded by whatever facts exist.
i proceed on the basis that you are approaching this discussion with a similar outlook.
Anyway, in trying to distil where we hold a common view and where our thoughts are diverging, I wonder if we can summarise as follows:
1. We agree (based on what we now know) that Rangers did not pay sufficient PAYE & NICs in relation to the portion of their salaries that were diverted into the DOS scheme (Wee Tax Case).
2. We agree that Rangers’ failure to meet the standard legal obligation to collect & pay the relevant taxes was not caused by any failure on the part of HMRC (though actually still, I think, Inland Revenue at the time).
3. We agree that in the normal (straightforward) operation of PAYE & NICs these would be considered overdue if not paid within the routine deadlines for payment.
4. We agree that if there is an active challenge to a company’s tax treatment or tax return then the taxes under appeal may* not be considered to be an “overdue payable” during the period of the challenge.
* I say “may” here as Annexe VIII (Club Licensing & FFP Regulations) 2. c. & d. place responsibility on the licensor (SFA) to satisfy itself that extant appeal proceedings are not simply a device to defer liability and also to examine the circumstances to determine if the appeal has any merit. If the licensor is not satisfied on either point, the amounts under appeal WOULD then still constitute an “overdue payable” under the CL & FFP regulations. The burden is on the licensee to PROVE that no “overdue payables” exist.
It is an important point, if not particularly contentious; but please let me know if you’re unhappy with my use of the word “may” here.
5. We agree that club officials knew that money** was due to the taxman on the 31st March 2011.
**Again for absolute clarity, we are referring to a debt that resulted from contractual and legal obligations towards employees that had arisen prior to 31st December 2010.
6. We agree that there was no active agreement at 31st March 2011 between HMRC & Rangers to defer payment of any outstanding PAYE & NICs.
So, based on the things to which we agree (if I am understanding your position correctly), the nub of the matter is not that Rangers did not owe any back taxes. Nor is it that they did not know they owed back taxes. It is simply that the “bill” – the demand for payment – did not arrive until after the 31st March deadline for Club Licensing submissions.
Your position, I think, is that “agreed terms” in this case is not covered by the normal (straightforward) operation of PAYE & NICs – but instead required the explicit demand for payment that was sent on 20th May.
Is that a fair summary so far?
If so, I think this is where we go our separate ways.
As I understand the normal (straightforward) operation of PAYE & NICs at the time, it was assumed and built into the system then (as it still is now) that taxpayers, employers and Inland Revenue/HMRC will make errors from time to time. When these errors (honest or otherwise) are later discovered, there are normal (straightforward) procedures that apply.
Inland Revenue/HMRC make a new assessment of the tax position which is presented to the taxpayer. If the error was from previous tax years, interest is routinely applied as the “applicable deadlines” have been missed. The debt is treated as overdue. The taxpayer is invited to make a payment (or sometimes given a specific payment schedule) to bring them back into line with the “agreed terms”.
The “error” in this case was in believing that that the DOS scheme operated correctly as a tax efficient method of rewarding employees (compounded by the provision of side-letters).
Any normal (straightforward) assessment is effectively a notice which says,
– We have discovered something which shows that you have paid less tax than you ought to have done (under the standard “agreed terms”).
– This is why you should have paid more (how the “agreed terms” were not met)
– This is the additional tax you should have paid in the tax years x, y and z (and is therefore overdue)
– This is the amount of interest that will be applied to the overdue amounts
– This is the amount you must pay now to bring your affairs back into order
– This is what you must do if you disagree with our assessment
Of course, if the taxpayer feels that the assessment is wrong it could be appealed internally and then subsequently to the FTT(T) – within the specified time limits.
If the taxpayer comes to accept the assessment, the taxpayer should then pay the overdue amount in its entirety or come to an agreement over a payment schedule. Until the payment is made or a payment schedule is agreed the amounts owed remain overdue.
It is only if an appeal fails or abandoned (or no appeal is submitted within the time limits) and the taxpayer still fails to pay that formal collection proceedings begin. Again, the amounts owed are already overdue.
In one sense, I think the DEMAND for payment (within 30 days), can be taken as an agreed payment schedule. When that demand was made (20th May 2011) the club was given 30 days before court action would commence.
The funny thing is, I think it was because the DEMAND for payment came after the 31st March that it is fatal to your case.
If the letter had been sent on the 31st March, the club would have had until 20th April to comply. It would then, under Annex VIII 2.b. been able to prove that it had ”…concluded an agreement which had been accepted in by the creditor in writing to extend the deadline for payment beyond the applicable deadline…”
But, on 31st March no such agreement was in place and (as you have already agreed) the club had no live appeal ongoing and its officials had accepted that the debt was real.
So, from the foregoing, it seems pretty straightforward to me that a debt was accepted as existing on the 31st March, no appeal was in place and that the debts came about from the failure to comply with the “agreed terms” of the operation of PAYE & NICs from previous tax years.
Am I missing something?
To Comply or not to Comply ?
I’m not sure that I fully understand your response to the point I made the other day regarding the meaning of ‘agreed terms’.
Just to help me understand your position more clearly…
Do you think the operation of the PAYE & NICs regimes normally requires a demand for payment from HMRC?
Knowing what you know now, would you agree that Rangers did not pay sufficient PAYE and NICs on the portion of player salaries that had been diverted through the DOS scheme (wee tax case)?
If you do agree, do you think that the failure to meet the standard legal obligation to collect and pay the relevant taxes was caused in any way by an error made by HMRC?
In the normal operation of PAYE & NICs, do you agree that they would be considered to be overdue if those taxes went unpaid beyond the routine deadlines for payment?
If the unpaid taxes were the result of the club’s deliberate act to bypass the normal operation of PAYE & NICs, is it your position that the amounts that should have been paid in say, 2001, were NOT overdue in 2002 and beyond?
To be clear, I am not asking what you think you or the club believed at the time. I am asking you on the basis of what you know now.
On the basis of court testimony from club officials, do you think the club believed there to be no outstanding social taxes on 31st March 2011?
Do you agree that no agreement to defer payment overdue taxes was in place as at 31st March 2011?
Do you agree that no application to appeal the outstanding amount was ever made?
If the taxes had only become overdue when HMRC began the formal collection process in May 2011, why would interest be applied?
Auldheid has mentioned on many occasions, the case of Giannini FC.
In that CAS decision, it was stated:
Misapplication of Article 50 of the CL&FFP Regulations
39. UEFA points out that it is not disputed that the Appellant owed EUR 1,290,000 to the social/tax authorities as a result from contractual and legal obligations towards employees that had arisen before 31 December 2012, and that this amount had not been paid by 31 March 2013. It is also not disputed that as of 31 March 2013, no written agreement existed with the Greek Tax Authorities in order to extend the deadline for payment beyond the applicable deadline. UEFA also underlines that the application made by the Appellant has been accepted on 28 May 2013, i.e. almost two months after the expiry of the deadline, and that CAS jurisprudence has “consistently recognised that deadlines for this kind of procedure are fundamental for the smooth running of competitions and must be applied consistently”. The mere existence of overdue payables is sufficient to declare the Appellant ineligible to the UEFA 2013/2014 Europa League.
Do you think that there is any dispute that Rangers had/have an outstanding amount owing to social/tax authorities as a result from contractual and legal obligations towards employees that had arisen before 31December 2010, and that this amount had not been paid by 31 March 2011?
Do you dispute the CAS assertion that “The mere existence of overdue payables is sufficient to declare the Appellant ineligible…”?
I understand that the HMRC letter in May could be construed as an extension to the normal deadline for payment. But, like the Giannini case, this was not granted until after the 31st March deadline. If you think the cases are substantially different, on what basis?
There are no trick questions here.
Genuinely interested to see your response.
My last comment marked as spam and removed as I tried to edit the paragraph spacings.
Was there a problem?