Further Update on Resolution 12 re The Processing of the UEFA Licensing application by Rangers FC.Before the 2016 AGM signatories to Resolution 12, or the subsequent mandate to release their names and for whom e mail addresses were known, were sent an update on progress on Resolution 12 plus an account of activity on their behalf.
It was necessary to reach individuals privately because at that time some of the information referred to may have been prejudicial to the Craig Whyte trial. Additionally, there was always the possibility that evidence at that trial might strengthen the conclusions contained in that update, which has turned out to be the case. That information and the absence of risk of prejudice is now reflected in the following Update which is now being delivered in a more public arena via CQN Magazine since the reasons for privacy have gone. There is much to absorb so the conclusions at the end of the timeline of events in 2011/12 are brought up front and they are:
Conclusion: There is enough evidence of non-disclosure and misleading statements to justify an investigation into events in 2011 and 2012 if only to:
• Examine and strengthen UEFA and National Club Licensing rules and processes by introducing some independent oversight of the club licensing process as conducted by the SFA in order to prevent a repeat.
• Reassure the life blood of the game in Scotland, the supporters of all clubs, that if evidence of dishonesty is provided it will be acted upon and not ignored to preserve faulty governance structures.
• Rule out the possibility of fraud by the Rangers FC, aided by their Accountants Grant Thornton, against both the UK taxpayer and the rival Scottish clubs for a UEFA place with the consequent loss to them of prize money as a result of the actions of Sir David Murray during his time as owner of Rangers FC up to 6th May 2011. Source: File 12.
Further to the above the completion of the big tax case appeal process asks questions of the SFA in terms of what they knew in 2011 about unlawful DOS ebts in 2012 when the SPL
were establishing the Lord Nimmo Smith Commission. Thus the foregoing only adds to the call as articulated by Celtic FC and others for the football authorities to review this matter, but given the questions that need to be asked of the SFA about their role in 2011/12 it makes the SFA’s desire to close down any enquiry of any sort understandable. It also raises the old question of “quis custodiet ipsos custodes. (who guards the guards) but it is abundantly clear someone must.
The Wee Tax Case Timeline: What Story Does It Tell?
1. 26th November 2010. HMRC make an offer to MIH to settle tax due from 2000 to 2003 in respect of remuneration payments made by Rangers Football Club to Ronald De Boer and Tor Andre Flo based on the outcome of The Aberdeen Asset Management FTT that finds the type of DOS ebts, as also used by RFC, unlawful. These early RFC ebts also had private agreements (side letters) not disclosed to SFA or HMRC.
Source: Letter of 23 Feb 2011 para 2 of File 1.
2. 10 February 2011. HMRC and MIH meet and HMRC agree to put forward to MIH a revised computation of the position after looking at side agreements critically.
Source: Letter of 23 Feb 2011 – para 1 of File 1.
3. 18 February 2011 during a telephone call made to HMRC by MIH on behalf of RFC the tax liability is accepted in respect of unpaid tax dating back to 2000, presumably after verbal advice from QC A Thornhill.
Source: Para 9 of Amended Points of Claim by Duff & Phelps in March/April 2012 of File 2.
4. 23 February 2011. HMRC document the case in a letter justifying that a liability exists and their right to pursue outside the normal six-year period.
Source: 23Feb Letter: Extended Time Limits of File 1. Page 4
5. 3 March 2011 the advice to settle and why (the deliberate concealment of side letters in 2005) is documented by QC Thornhill
Sources: Opinion by Thornhill near end of File 1. and letter from MIH to HMRC April 2005 File 3.
6. 21st March 2011. HMRC and MIH, the latter having accepted liability on 18th February, agree on the amount of the liability (£2.8m) and on same day an RFC employee has discussions with HMRC to await Takeover that resulted in postponement of collection action until after Takeover of RFC on 6th May.
Sources: Amended Points of Claim para 9 of File 2.
Annotation in manuscript on spreadsheet presented to HMRC by MIH on which amount agreed near end of File 1. And E mail of 5th May from RFC employee to HMRC. File 4. and para 3 of File 5.
7. 30/31st March 2011 Grant Thornton the Auditors of RFC in a report that according to SFA CEO was submitted to the SFA Licensing Committee, say that by 31st March all taxes are paid in full up to 31st December 2010 by RFC “with the exception of the continuing discussions between The Club and HM Revenue and Customs in relation to a “potential” liability of £2.8m”. Andrew Dickson was a License Committee member at the time who, as a football administrator of long standing looking after contracts paperwork since 2004, would know of both FFP rules and ebts with side letters. It is inconceivable that both he and Campbell Ogilvie, SFA Vice President at the time, who initiated the DOS ebts that caused the liability, and was a recipient of the big tax case ebts under appeal, were unaware that HMRC were pursuing payment before 31st March.
Source: A proposed draft set in an e mail of 7th December 2011 by SFA CEO to RFC to clear. Third item with a highlight at. File 6.
8. 1st April 2011. “Potential” is the description used by the RFC Auditors in Note 1 of The Half Yearly Accounts of that date to explain the Exceptional Item recorded as such therein, although no mention is made in that Note of “continuing discussions.” That is introduced in the covering Statement by the RFC Chairman who repeats the description of “potential” and to which he adds “discussions are continuing with HMRC to establish a resolution to the assessment raised”. Source : File 7.
(This misrepresentation meets the definition of fraud described by Mr Prentice the Advocate Depute at the Craig Whyte trial where he said: “A fraud involves a false pretense, dishonesty made, in order to bring about some definite practical result.
Read more at: http://www.scotsman.com/news/craig-whyte-dishonest-about-funding-in-rangers-takeover-1-4463452 )
9. Later in the same draft ( para 7 above), the SFA CEO justified the granting of the licence on the basis that the liability was “potential” and “under discussion” and so could not be an overdue payable at 31st March under Article 50.
Source: File 6.
The evidence above and what has emerged from Craig Whyte trial suggests an actual liability of £2.8M had already been verbally agreed on 17th March and crystallised on 21st March 2011 and any discussion with HMRC at that point was to defer collection, not resolve the assessment. Further had a written agreement been reached with HMRC to delay collection on 21st March then surely that would have featured in the SFA CEO’s justification, not only to Celtic, but in his public utterances where there was no mention of any agreement with HMRC only the liability had not crystallised and was disputed? Source: File 13
The absence of its mention suggests nothing agreed in writing with HMRC as required by FFP and that Celtic were misled in December 2011 by the SFA response to their enquiries which led them in 2013 to say that Resolution 12 was not necessary.
Further: If SFA are justifying granting on the basis of HMRC agreeing to a postponement (even if not made in writing) then given that Takeover happened on 6th May and UEFA not notified of licences granted until 26th May, did SFA not have a responsibility within the granting period, knowing of any agreement, to check if the tax had been paid before submitting list to UEFA?
Finally, the categorising of the liability as “potential” by Grant Thornton does not comply with On Line advice of how a liability should be treated in company accounts. http://accounting-simplified.com/liability-recognition.html )
10. 5/6th May 2011. After allowing collection of overdue payable “to drift” from 21st March HMRC commence collection proceedings on 5th May. File 7. That letter refers to an agreement with Mr McIntyre of MIH to wait for developments regarding a potential Takeover but HMRC cannot let matters drift anymore.
On 6th May Mr McIntyre, unsighted on 5th May HMRC letter, contacts HMRC. File 7A In that communication he refers to “our discussion of 21 March” a day on which Mr McIntyre recorded in manuscript acceptance of the wtc liability and quantum (see last page of File 1. )
Neither Mr McIntyre nor HMRC refer to any letter/documented agreement made between 21st March and 5th May 2011, which suggests none exists at 31st March to enable compliance with UEFA FFP. The SFA belatedly claimed to a Guardian journalist in June 2016 that they had an unpublished document of such an agreement, but they failed to provide to another journalist who was promised sight but that never materialised suggesting no document enabling compliance with UEFA FFP exists.
(Separately: Given the 5th May letter was a significant change of the “potential” status ascribed to the wtc liability by Grant Thornton and RFC Chairman should this not have been reported on receipt to the SFA by RFC under FFP rules 3 weeks before UEFA provided with list of clubs granted a licence?)
11. 20th May 2011. After the “drift” following discussions with RFC on 21st March 2011, the tax demand, repeating some of the justification for payment as in the 23 February 2011 HMRC letter, is delivered to RFC.
Sources: File 8 (It has not been possible to get confirmation from enquiries made under Resolution 12 of SFA or UEFA or later by the Tax Justice Network, if the SFA and UEFA were notified by RFC of arrival of this tax demand and covering letter six days before the list of licences granted was sent to UEFA on 26th May 2011.)
12. 30th June 2011. The “potential” liability somehow morphs into an actual one, but is “shown as” ‘status postponed (awaiting scheduling of payments’). If this is what was shown on the submission to UEFA under Art 66, neither was true and why, given that the justification for granting was either
• the liability was only a “potential” one at 31st March or
• there was an agreement (written or otherwise) to postpone until Takeover (on 6th May)
was neither aspect investigated by the SFA and checked with HMRC before passing submission to UEFA? Source Internal E mail: File 8a.
13. 28th July 2011. Evidence that HMRC were not blind to the possibility that a CL place being won would mean that the wtc bill would be paid. File 8b para 7. Regardless only the production of an agreement signed by HMRC to postpone collection dated 31st March or earlier would excuse the wtc liability from being an overdue payable at 31st March.
14. 10 August 2011. Sherriff Officers call at Ibrox to collect payment of £2.8M overdue since 2001/03.
15. 19 September 2011. The SFA and UEFA must have been in discussion in order for UEFA to verbally accept the 30th June submission made by RFC under Art 66 at 30 June 2011. How did the SFA explain the status of “postponed” of the liability to UEFA (File 8a ), given that any postponement, regardless of form, ended on 5th May, in such a way that UEFA were happy not only to verbally accept the submission of 30th June, but decided not to request future financial forecasts just 4 and a half months before RFC entered administration prior to liquidation? The tone of the SFA advice to RFC to meet Article 67 requirement suggests UEFA would not be picking up the issue. File 9A . Who or what factors influenced UEFA, what were they told by the SFA?
16. 30th September 2011. Art 67 Submission to UEFA by RFC File 9B referring to continuing discussions with HMRC re wtc liability with mention of an appeal against a further penalty. It claims £500k paid with ongoing discussion on payment of the balance. This was not true. In fact, no payment had been voluntary made towards the sum owed. HMRC had frozen sums following collection action in August 2011, and any ongoing discussions were for the full amount owed, but the submission suggested meaningful discussions. Eventually HMRC attributed the sums frozen to the unpaid VAT and PAYE that saw RFC enter administration and the wtc liability plus penalties was never paid. UEFA appear not to have questioned the Article 67 submission as the SFA had suggested.
17. 24 Nov 2011. E mail from Saffrey to Phil Betts updating him on the leave to appeal attempt against the wtc liability, which according to the e mail, HMRC themselves were waiting to hear about which suggests no appeal made by Nov 2011. The email also reveals why HMRC are confident about their position regarding the determinations. File9C.
18. 15 March 2012; The then SPL lawyers Harper McLeod, write to Duff and Phelps RFC Administrators requesting all documentation relating to ebts and side letters use by RFC since July 1999 be disclosed to them. The HMRC letters of 23 February and 20th May 2011 mention the De Boer side letter of August 2000, and describe the DOS ebt scheme used in detail but it can only be assumed that these letters were not provided by Duff and Phelps. Had the two HMRC letters of Feb and May 2011 been provided the terms of reference of the LNS Commission would have to reflect those EBTS that had already been deemed unlawful by the Aberdeen Asset Management FTT in late 2010 (see para 1). The start date of the eventual LNS Commission would also have to have been 30th August 2000 as that was first use of an ebt with side letter by RFC.
In both the matter of the UEFA Licence in 2011 and LNS Commissioning in 2012 the 20th May 2011 HMRC letter’s non-disclosure at the time it was required/requested in March 2012 was crucial in terms of influencing major decisions made by Lord Nimmo Smith that continue to affect the integrity of the governance of Scottish Football 5 years later.
Source. File 10.
19. March/April 2012. Duff and Phelps as authors of a Points of Claim made at that time use information that can be found in both the 23 Feb 2011 and 20th May 2011 HMRC letters. This suggests they had knowledge in the spring of 2012 of the unlawful ebts of 2000 and the HMRC documents describing them, which asks why they failed to disclose the latter to the SPL lawyers. Sources 10.8 to 10.10 of Administration Progress Report at: http://www.heraldscotland.com/sites/default/files/duffphelps.pdf and paras 9 and 11 of File 2.
20. July 2013. The Court of Arbitration for Sport ruled on the case of Greek club Giannina FC whose application for a UEFA licence in May 2013 was denied by UEFA on the basis that at 31st March the club had an overdue payable to the Greek Tax Authority due to obligations that arose prior to 31st December 2012 and that no written agreement with the tax authority existed to extend deadline in place at 31st March under Article 50.
Source: Paras 9, 39 and 73 to 80 File 11 and as a result of an investigation by UEFA, Giannina had “private agreements” with employees that transgressed UEFA FFP Accounting rules under Article 47 and Annex VII. Source: paras 10, 40, 84 and 85 File 11.
21. Overdue payables. The main difference between the Giannina case and RFC is that what was presented in the RFC accounts suggests a dispute around the liability at 31st March, where no dispute existed from 21st March 2011, which means an overdue payable existed at 31st March and in the absence of any written agreement signed by HMRC to defer payment no licence should have been granted under UEFA rules. The failure to reveal the true nature of the liability in RFC accounts is a serious matter, particularly if it denied Celtic a place in the Champions League, as is any failure by the SFA to grant a licence without a written agreement between RFC and HMRC.
Regardless of any agreement being in writing, SFA failed to confirm payment had been made after Takeover in early May and had a verbal conversation with UEFA to talk them through the submission under Article 66 made in June 2011 where the status since granting had changed from potential to postponed neither of which was true.
22. Private Agreements The circumstances where side letters were kept private from both the SFA and HMRC in the 2011 UEFA Licensing process involving Rangers FC are very like those involving Giannina FC and UEFA in 2013. A member of the SFA Licensing Committee in 2011 had full knowledge of private agreements at RFC going back to being responsible for them since 2004. Although CAS did not rule on this issue (paras 84 and 85) UEFA’s stance that a licence should not be granted is clear (para 40).
23. Conclusion: There is enough evidence of non-disclosure and misleading statements in the foregoing to justify an investigation into events in 2011 and 2012 if only to:
• Examine and strengthen UEFA and National Club Licensing rules and processes by introducing some independent oversight of the club licensing process as conducted by the SFA in order to prevent a repeat.
• Reassure the life blood of the game in Scotland, the supporters of all clubs, that if evidence of dishonesty is provided it will be acted upon and not ignored to preserve faulty governance structures.
• Rule out the possibility of fraud by the Rangers FC, aided by their Accountants Grant Thornton, against both the UK taxpayer and the rival Scottish clubs for a UEFA place with the consequent loss to them of prize money as a result of the actions of Sir David Murray during his time as owner of Rangers FC up to 6th May 2011. Source: File 12.
Here’s the new CQN Podcast featuring Paul67 with exclusive insight into the situation post the Supreme Court ruling on the Big Tax Case and Matt McGlone giving his views.
