Part 4: 1 October 2011 – April 2012

 

Previous: Part 3

 

Defending the indefensible and heading for insolvency

 

  1. 3 October 2011. HMRC writes to RFC asking when the sums arrested in the club’s Bank of Scotland accounts will be released.
 Source: Email from Saffray Champness to RFC dated 4 October 2011 in Section 4, “Collection Matters” of Ref19

 

 

  1. 4 October 2011. Saffrey Champness hold a conference call with HMRC, after which they email a summary of the discussions to RFC officials.

 

HMRC indicated that they would reject any late appeal of the determinations dated 20 May 2011, leaving the club with the option of going to a Tribunal to obtain leave to appeal. HMRC advised that the Tribunal would likely reject the request, for the same reasons as the Court of Session had rejected the suspension of collection proceedings in August.

 

HMRC wanted to know by 10 October if RFC wished to withdraw the late appeal to them, failing which HMRC will write to Saffrey formally rejecting the appeal. A later document, dated 24 November, indicates that a request for leave to appeal was made to a Tribunal following rejection by HMRC.

Sources:
Email from Saffray Champness to RFC dated 4 October 2011 in Section 1,
“Discounted Option Scheme” of Ref19, 
Email from Saffray Champness to RFC dated 24 November 2011 at point 1, of Ref23

2a. 6 Oct 2011.  This e mail       from Gary Withey to Craig Whyte on 6th October  shows that Rod McKenzie briefed SPL CEO Neil Doncaster by copy of a meeting Withey had with Rod McKenzie SPL Lawyer and that Doncaster required an outline paper setting out the process that is being proposed to achieve the discussed end whatever that end was.

Although the side letters to ebts issue arose later in March 2012, everyone knew in Oct 2011 about the big tax case which ultimately led to insolvency so it is more than possible that dealing with unlawful ebts should the FTT find for HMRC was part of the discussion.
Perhaps this “discussed end”  became the 5 Way Agreement?

 

  1. 12 October 2011 HMRC write to Saffray Champness with full reasons for rejecting their request for a late appeal of the determinations dated 20 May 2011. HMRC described the appeal as “vexatious”.
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. 19 October 2011 Saffrey Champness emails RFC officials following a phone call with HMRC, expressing concern that, because the arrested funds had not been released, room to manoeuvre was limited. It was accepted that the funds could be used to satisfy outstanding PAYE and VAT liabilities, but noted that the club hadn’t signed the instructions to the bank.
Source: Email from Saffray Champness to RFC dated 19 October 2011 in Ref20

 

  1. 11 November 2011. Saffery Champness sought the opinion of a tax counsel, then emails Gary Withey outlining a strategy and reasons for seeking leave to make a late appeal to a Tribunal against the determinations of 20 May 2011. (The argument that there is no proof the 20 May letter was received is destroyed by the MCR letter of 6th June. This refers to  the 20th  May HMRC letter the SFA subsequently asked Celtic shareholders lawyer to see during the Compliance Officer investigation starting September 2017)
Source: Email from Saffray Champness to RFC dated 11 November 2011 in Ref21

 

  1. 22 November 2011 Ken Olverman emails Craig Whyte outlining the issues faced in preparing their 2012/13 licence application.
    It refers back to the DOS tax liability in the June submission “which we dealt with” That submission described the liability as having a ”status of postponed (awaiting scheduling of payments)”  It is not clear if Olverman anticipated that status would continue to be accepted.
Source: Email from Ken Olverman  to Craig Whyte RFC dated 11 November 2011 in Ref22

 

  1. 24 November 2011. Following a phone call from HMRC, Saffrey Champness emailed RFC officials with a summary of discussions. The email confirms that an application to a Tribunal for leave to appeal the determinations of 20 May 2011 had been progressed, although no decision had been forthcoming. HMRC confirmed their reasons for issuing out of time determinations on fraud or negligence grounds. It was noted that HMRC had described Ian McMillan, MIH Tax advisor, as a liar. Saffrey Champness also noted that, if HMRC could justify the extended time limits, they “have no fundamental position with regard to the late appeals because we have no material argument that the assessments themselves are incorrect.”
Source: Email from Saffray Champness to RFC officials dated 24 November 2011 in Ref23

 

  1. 24 November 2011. RFC provides the Bank of Scotland with instructions to release the £2.9M funds arrested in September. The funds were to be applied to the outstanding VAT arrears at the request of RFC.
Source: Duff and Phelps Creditors Report  dated 5th April 2012  at point 9.26.

 

  1. 7 December 2011 SFA Chief Executive Stewart Regan emailed RFC officials with a draft of a proposed press release, ostensibly to quell media speculation about the issuance of a UEFA Licence for season 2011/12. The proposed release justified the issue of a licence on the basis that the tax liability was described as “potential” by the RFC auditors on 30 March 2011 and adding “Since the potential liability was under discussions by Rangers FC and HM Revenue and Customs at 31 March 2011 it could not be considered and overdue payable as defined by Article 50. Clearing such a release with the party suspected of making inaccurate submissions during the licensing process is highly unusual in itself.

 

The email chain that follows shows the proposed statement itself was met both with incredulity and concern from RFC officials with good reason as the reason for not applying Article 50 was false.. The email chain goes on to confirm that the SFA agreed to put the publication of the statement on hold following representations from RFC, but also that a dinner with Regan and SFA president, Campbell Ogilvie had been arranged for 20 December 2011, to discuss “bigger issues”

Source: Email chain dated 7 December 2011 in Ref7a

 

  1. 3 January 2012. HMRC receives confirmation from Collyer Bristow that “that the Tax Liability Amount remains in my client account. We have received advice that there is a ground for challenge and the Club wish to pursue that challenge”
Source: HMRC Points of Claim to an action at the High Court of Justice in London, dated xx March 2012, at para 20 of File 2.

 

  1. 31 January 2012. RFC submits a declaration in the form of a UEFA licensing template to the SFA, in preparation for applying for a licence for 2012/13. As well as other issues on Art 50 overdue tax payables it states, “Detail and agree dispute on DOS Tax Case”.
Source: UEFA Licensing template dated 31January 2012 in  Ref25

 

  1. 31 January 2012. The covering email sent with the above template refers to the DOS liability as having been appealed. The nature of the appeal is not clear from the email. Had a Tribunal granted leave to appeal the determinations dated 20 May 2011 to a First Tier Tribunal appeal, was that decision still awaited, or was it only the penalty imposed that was subject to appeal?

Note: clarity was provided by HMRC on 10 February 2012 (see below)

Source: Covering email from RFC to SFA dated 31January 2012 in Ref17

 

  1. 1 February 2012. The SFA writes to Ken Olverman seeking proof of the statements in the submission relating to the tax liabilities, stating “the Licensing Committee will need to receive written correspondence to be satisfied that the amount is a genuine legal dispute”
Source: Letter from the SFA to Ken Olverman dated 31January 2012 in Ref26

 

The SFA’s request for proof of a stated position appears to be a fair one and consistent with UEFA requirements, but it’s a request for supporting documentation that was seemingly lacking throughout the previous licensing. Had the SFA learned from their earlier failings and were unwilling to make the same mistakes?
 

  1. 2 February 2012. Ken Olverman emails Craig Whyte with the SFA’s latest response on Licensing. As well as repeating what he told the SFA, he expresses disappointment at how the arrested funds (now released) and the £500k claimed to have been paid at end of September were applied to arrears by HMRC because it creates more difficulty in meeting licensing requirements.
Source: Email from Ken Olverman to Craig Whyte dated 2 February 2012 in Ref27

 

  1. 10 February 2012. HRMC emails Gary Withey, apparently in response to a time to pay proposal. HMRC formally rejects the proposal as unacceptable, but admonishes Withey in stating that “The only part of the DOS liability under appeal is the penalty” That poses questions about the efficacy of the club’s Licensing template submission to the SFA dated 31 January 2012.HMRC also noted that the Aberdeen Asset Management appeal had gone in favour of HMRC which would render any RFC appeal academic. (AAM’s appeal to the Upper Tier Tribunal in respect of their own DOS scheme was rejected on 9 December 2011)
Source: Email from HMRC to Gary Withey dated 10 February 2012 in Ref28

 

Given the foregoing correspondence, it seems reasonable to conclude that there were never any arguable grounds for a late appeal. It was all about circumventing UEFA FFP rules on an “overdue payable” tax liability that began in the March 2011 application by RFC and continued into the 2012 licensing round.

 

  1. 13 February 2012. Craig Whyte filed a Notice of Intention to Appoint Administrators with the Court of Session
Source: Duff and Phelps Creditors Report  dated 5th April 2012  at point 5.22.

 

  1. 14 February 2012. HMRC filed a creditors claim of circa £9M and a petition to appoint administrators. After some discussion HMRC withdrew their petition and Duff and Phelps were appointed as administrators of Rangers Football Club plc.
Source: Duff and Phelps Creditors Report dated 5th April 2012 at point 5.23

 

  1. 20 February 2012. Duff and Phelps drop the club’s late appeal against the DOS tax liability
Source: HMRC Points of Claim to an action at the High Court of Justice in London, in  March 2012, at paras 13 and 23 of File 2.

 

This is at odds with HMRC’s own assertion, on 10 February 2012, that only the penalty element was being appealed, but nothing changes on either version being correct.

 

  1. 20 February 2012. Duff and Phelps write to Collyer Bristow requesting the payment of the sums representing the DOS tax liability.
Source: HMRC Points of Claim to an action at the High Court of Justice in London, in  March 2012, at paras 23 and 25 of File 2.

 

  1. 2 March 2012. Duff and Phelps confirm receipt of funds from Collyer Bristow representing the DOS tax liability. The funds were held in an account to the order of the court.
Source: HMRC Points of Claim to an action at the High Court of Justice in London, dated xx March 2012, at para 24 of File 2.

 

  1. March/April 2012. As part of their responsibilities as administrators, Duff & Phelps initiated “Part 7 claims” against Craig Whyte and Collyer Bristow, in respect of financial undertakings made as part of the Share Purchase Agreement on 6 May 2011, and the recovery of such funds still held by either party. Claims were also made against these funds by five other interested parties, including HMRC. Two submissions into the court proceedings were made on behalf of HMRC, one of which was a witness statement by the HM Inspector of Taxes who was the lead individual working on the case involving RFC’s DOS Liability. Those statements have provided useful background information in preparing this timeline.

Proceedings were formally started at the Chancery Division of the High Court of Justice, in London on 16 April 2012. The progression and outcome of the claim is not relevant to the purpose of the timeline, save to say that HMRC received £86,469.06 as their share of the recovered sums in an out of court settlement.

Sources:
HMRC Points of Claim to an action at the High Court of Justice in London, dated xx March 2012, at para 24 of File 2.
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.
BDO Creditors Report dated 12 June 2015, Section 2 Receipts & Payments, Funds Proceedings of Funds Proceedings

 

Next: Part 5 – Links with LNS