The Linkage between The UEFA Licence 2011 and the Lord Nimmo Smith Commission in 2012/2013.
17/21 Feb 2012. Although better informed as a result of his conversation with Andrew Dickson on 6th December 2011 in respect of the unlawfulness of DOS EBTS, where HMRC were pursuing the non-payment of proper tax under PAYE terms, SFA CEO Stewart Regan met Lord Nimmo Smith on Feb 2012 to decide the Terms of Reference for the Judicial Panel Disciplinary Tribunal charging Craig Whyte with bringing the game into disrepute.
Somehow the charges (on page 50 Disciplinary Charge 4) neglected to mention Craig Whyte’s failure to meet his undertaking in June 2011 to pay the £2.8m tax bill arising from unlawful use of DOS EBTs, yet referred to charges on other taxes not being paid.
By February 2012 it was abundantly clear the wee tax bill had not been paid after Sherriff Officers called to start collection proceedings in August 10th, 2011. Any enquiry of HMRC in February of 2012 would have confirmed the amount was still outstanding.
Did this exclusion prevent Lord Nimmo Smith from having any understanding of the nature of DOS EBTS?
A detailed timeline of events in 2012 can be found on an E Tims Article here and what Lord Nimmo Smith was told or not told can perhaps be deduced from a later “ Reasons” document produced on 12 September 2012 posted below.
5 March 2012; Under direction of Neil Doncaster the then SPL lawyers Harper McLeod, write to Duff and Phelps RFC Administrators requesting all documentation relating to all EBTs with side letters used by RFC since 1st July 1998 be disclosed to them SPL Announcement
This included HMRC letters of 23 February and 20th May 2011 which mention the De Boer side letter of August 2000, and describe the DOS EBT scheme used in detail Ref2 and Ref11
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 here and paras 9 & 11 here .
21 March 2012 as part of pursuit of their Points of Claim the HMRC official responsible for establishing HMRC were owed tax dating back to 2001-02 provided Testimony at The High Court of Justice that sets out when HMRC first notified Rangers in June 2004 that they were going to open an enquiry into a tax return filed by the club for 2001 -2002 and reports efforts to establish liability and then obtain payment from early May 2011 to February 2012.. Ref 29a
12 August 2012. The SPL announce the Lord Nimmo Smith Commission which set the date of 23 November 2000 as an issue under inquiry.
Source LNS Decision February 2013
“ C. Issues for Inquiry into and Determination by the Commission
- the period from 23 November 2000 until 21 May 2002 (inclusive) Rangers PLC, whilst a member of the Company and the owner and operator of Rangers FC, and Rangers FC, whilst a member of the Scottish Premier League, breached Rule D10.2.3 by making and/or entering into EBT Payments and Arrangements in respect of the Specified Players
- and/or the Specified Players
- and/or other Players employed by Rangers PLC without detailing same in the relevant Players’ Contracts of Service;
12 September 2012. As a result of questions raised after his appointment to the SPL Commission investigating Rangers use of side letters and ebts Lord Nimmo Smith produced a “Reasons” report in which the significance of the DOS EBTS was dismissed and yet no one at the SFA or SPL questioned his reasons for doing so.
Source: The original LNS “Reasons” report has been removed from the SPFL web site for some reason but a copy is held here along with comments in red at various sections but the key extracts in relation to DOS EBTS with comments in red are:
 The topic of the employee benefit trust (“EBT”) referred to in the Issues before this Commission was touched upon in two paragraphs (and only those two) of the report of the Special Committee of the SFA, (produced in February/March 2012- see above- but never made public) but no recommendation was made to the Board in that regard. The main reasons for not making a recommendation were:
(1) the EBT came into existence several years before the period with which the Special Committee was concerned; This will be the DOS ebts which did precede Craig Whyte taking over RFC but in the Takeover Agreement he undertook to pay the liability that was discovered as a result of due diligence by Wavetower in March 2011. The failure to pay it by CW was deserving of inclusion in the Judicial Panel that charged him with bringing the game into disrepute as were the charges relating to non payment of PAYE and VAT, but for some reason it wasn’t.
and (2) there was in any event no sufficiently clear evidence of a breach of SFA Article 12.3 to justify any further action at that stage.
Au contraire – there was ample evidence in the form of HMRC letters to RFC from November 2010 to 20th May 2011 to justify a breach of Article 12.3 which says
“12.3 All payments, benefits or consideration of any description which are to be made to a player by or on behalf of a club in respect of or in connection with that player’s playing or training activities for the said club (other than re-imbursement of expenses actually incurred) must be fully recorded within a written agreement between the club and the player which must be submitted to the Scottish FA.”
From the date range that the Lord Nimmo Smith Commission was directed to cover beginning 23 November 2000 it can safely be assumed that the De Boer side letters nor HMRC reference to it were provided to the SPL by Duff and Phelps, who clearly had knowledge of the case from their Points of Claim in March 2012.
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 Part 1 of timeline).
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. Significantly correspondence with SFA of 26 April 2016 shows that the 20th May letter should have been provided by Rangers to the SFA on receipt in May and it is unclear from SFA reply whether or not and when the SFA had this letter.
The significance of the wee tax case letters of February and May 2011 (the latter which the SFA should have had in their possession under UEFA FFP rules after its arrival in May 2011) with the term “fraudulent “included, is unlikely to have been lost on the SFA in damage limitation terms , so it is not surprising that any reference to information in the wee tax case documentation is noticeable by its absence from scrutiny when the Terms of Reference for the Craig Whyte JPDT were first discussed with Lord Nimmo smith on 17th February 2012..
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 under UEFA FFP and requested in March 2012 by SPL lawyers was crucial in terms of influencing major decisions made by Lord Nimmo Smith one justification for which was in para 108 of his Decision where he said
“While there is no question of dishonesty, individual or corporate we nevertheless take the view that the nondisclosure must be regarded as deliberate.
There is no question that non disclosure was deliberate as Lord Nimmo Smith decided but those HMRC letters suggest that there was dishonesty involved, possibly fraud, and the non disclosure of the 20th May 2011 letter in 2011 and 2012 ( the implications of which the SFA (not surprisingly) have refused to revisit in September 2017 in response to an SPFL request) continue to affect the integrity of the governance of Scottish Football 5 years later and remain a stigma on our game .
Note: For a full narrative on how the LNS Commission was set up (and “set up” is appropriate) read the blogs starting from the Index to LNS Set up