HMRC v Rangers: the appeal. HM Revenue & Customs (HMRC) have decided to lodge an appeal to the Upper Tier Tax Tribunal in order to challenge whether payments made to players participating in Rangers EBT were really disguised wages and not loans.

The First Tier Tax tribunal had accepted that the payments were genuine loans which was a blow for HMRC. The case is of interest to anyone who is interested in the legal concept of "sham": the Ranger's players taking part in the EBT have not paid income tax or national insurance on funds advanced by the EBT, yet it outwardly appeared that they accepted loans in lieu of wages.
Rangers is in HMRC- induced liquidation and so if the sums advanced were written off by the liquidator they cannot surely be described as loans. If the liqudator demands repayment (which depends on the loan terms) then HMRC will stand to benefit as a creditor. If the loans are written off then perhaps this creates a taxable event for income tax and NICs. HMRC will be keener to prove that the amounts were not loans in the first place and then tax them as pay, but we will have to wait and see what HMRC is going to argue.

There is some concern as to why HMRC is taking this case when the company is in liquidation. However the concept of sham in conjunction with a tax avoidance scheme involving loans is something that is worthy of further inquiry.