Private Eyes take on the rangers fakeover
MUCH concern has been expressed in Scotland at the growing financial problems faced by Rangers over their involvement with employee benefit trusts (EBT), established to make payments to players and it seems club officials without incurring income tax or national insurance. The beneficiaries of the EBTs obtain loans which are not taxable and probably never repaid.
HMRC is now challenging the trusts and the Glasgow club faces demands for back tax, interest and penalties of possibly up to £50m if it loses the tax case.
EBTs were much favoured by football clubs, particularly for foreign-born players and those on the highest salaries. But the taxman has been clamping down. Many trusts were found not to work because they had not been properly operated. In Rangers’ case it appears that the payments by the club into the EBTs may not have been structured tightly enough to justify the necessary claim that the loans made by the supposedly independent offshore trustees were discretionary, not contractual, and thereby disguised income.
HMRC will not have been impressed by the fact that it seems at least one EBT scheme was promoted by an old Eye favourite, Paul Baxendale-Walker (see Eye 1183). The lawyer was struck off in 2007 for double-dipping by advising clients to use tax schemes from which he secretly benefited. He had already been suspended for helping in the defrauding of pensioners in a small Scottish engineering company.
However, help for Rangers is at hand in the shape of entrepreneur Craig Whyte, who is said to be discussing a takeover bid to buy out Sir David Murray’s interests in the club.
Whyte, who is 40 and lives in a Scottish castle, is a man of mystery for someone to whom others seem keen to confer billionaire status. He is a director of Pritchard Stockbrokers and a shareholder in the AIM-listed Merchant House corporate finance group. They are authorized by the FSA. Whyte is not.
He was a director of LM Logistics Group, which was controlled by Merchant Corporate Recovery, where he is still a director, and Merchant House group is an investor. Warehousing group LM collapsed into administration in August last year. Whyte had resigned in March. The deficiency for creditors was £3.4m, threatening to wipe out Merchant Corporate Recovery’s investment and, more importantly, a £661,000 loan.
As a result of LM’s problems the January 2010 accounts for Merchant Corporate Recovery — filed late on 31 March this year — were qualified by the auditors Hazlewoods. The auditors disagreed about the accounting treatment of the companies in which it had invested, such as LM. Whyte said to include them would be misleading; Hazlewoods said that was required by both the Companies Act and accounting standards.
Hazlewoods stated: “In our opinion due solely to the non-inclusion of the controlled investee companies… the financial statements do not give a true and fair view of the state of the company’s affairs… have not been properly prepared in accordance with the requirements of the Companies Act 2006.”
Hazlewoods also raised an “emphasis of matter” issue over the “going concern” basis upon which the 2009 accounts, filed only last February, for another investment, coach company Countryliner Group, had been prepared. Since the balance sheet date, one subsidiary had done a creditors’ voluntary arrangement and another had collapsed into liquidation.
The accounts for Tixway UK are overdue from last October and it faces a proposal to be struck off, as do two other Whyte companies: Merchant Interactive and Zemfill, from which he resigned last year.
Otherwise, Whyte seems an ideal saviour for Rangers on whom Sir David Murray, HMRC and the fans can By LightingMonkey