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The Rangers Case: Victory for HMRC in the Supreme Court

On 5th July 2017, the Supreme Court delivered the decision that HMRC has long-awaited in the case concerning the Employee Benefit Trust (EBT) operated by the Murray Group for senior executives and footballers.

The judgment began by stating that the appeal concerned a “tax avoidance scheme by which employers paid remuneration to their employees through an employees’ remuneration trust in the hope that the scheme would avoid liability to income tax and Class 1 national insurance contributions”.

This description gave a good indication of the likely conclusion that the Court would conclude that the “hope” of “avoiding” tax would fail.


How was the scheme structured?

  • Broadly, the football club established a practice of remunerating footballers and other employees by means of a cash contribution to an EBT which, in turn, established and funded sub-trusts for the benefit each individual’s family.
  • The sub-trust would then advance funds to the individual at a commercial rate of interest but on a discounted basis to reduce the value of the individual’s estate for inheritance tax purposes on death. The individual was appointed ‘protector’ of the sub-trust with a power to vary the beneficiaries, and appoint and remove trustees.
  • The operation and benefits of using a trust were explained to each individual as being, in particular, that it would result in the receipt of a greater cash sum than if he received payments subject to PAYE, but that being a protector conferred no absolute beneficial right on the employee to such sums. While the trustees of the principal trust had a discretion as to the creation of sub-trusts, they invariably did so when asked.
  • The club paid annual bonuses that were discretionary and paid, in whole or in part, through such a trust arrangement.

What were the Supreme Court’s conclusions?

  • Income tax and NICs were payable on remuneration whether or not such remuneration is paid to the employee or to a third party (e.g. a trust).
  • As a consequence, the payment of money into the main trust was remuneration for both footballers and other employees.
  • This is despite the amount paid in respect of the individuals who were not footballers being discretionary with no prior legal entitlement.
  • The fact that the contributions were voluntary was “irrelevant so long as the sum of money is given in respect of the employee’s work as an employee”.
  • The Court was not prevented from reaching this conclusion by the risk that, following the contribution, the Trustees could exercise their discretionary powers in a manner which would prevent the employee in question receiving the funds personally. This risk did “not alter the nature of the payment to the Trustee …”.

What are the implications of the decision?

  • The fact that the decision was reached by the Supreme Court combined with the reasoning means that it is likely to be conclusive as to the tax analysis of contributions to other EBTs with it being difficult to identify fact patterns which would allow other cases to be distinguished.
  • In many cases, the ability of HMRC to raise assessment in respect of historic contributions will be limited. This might be because time limits for raising assessments may have passed or because a settlement has been reached with HMRC in respect of previous tax liabilities.
  • Where this is not the case, however, tax and national insurance contributions may now be due. In such cases:
    • The terms of the trust may establish whether such a liability may be claimed by way of indemnity against trust assets.
    • There is a risk of HMRC responding to the decision by issuing follower notices under the Advance Payment Notice legislation.
  • A feature of the decision is clarification that, due to tax being due on contributions, employment tax should not have arisen under general employment tax rules on subsequent distributions or benefits. There may, therefore, be scope for some tax which has been paid to be recovered by beneficiaries (such as tax and NICs on notional interest on loans made by Trustees).
  • HMRC may seek to apply the decision more widely to other forms of employment related trusts.

How can Pett Franklin help?

If you have any questions about the implications of this decision or you require advice in light of the Supreme Court’s findings, please call 0121 281 5798 or email

Pett Franklin are experienced in negotiating settlements with HMRC, and look to achieve the best possible outcome for taxpayers while bringing matters to a clear and final conclusion on all sides. We are also able to provide practical guidance for taxpayers concerned about their tax affairs.