Rangers, EBTs and the unanswered question of sporting advantage

More than a decade after Lord Nimmo Smith’s report, the evidence still points to a Scottish football establishment unwilling to confront what Rangers gained through concealing player payments.

The Manchester City case has reopened an old wound in Scottish football, what does a competition do when a club’s financial conduct is found to have distorted the terms on which everyone else competed? In England, the question now sits in front of the Premier League after Manchester City were found guilty of 114 of 115 charges, with sanctions still to be determined and an appeal expected.

In Scotland, the comparable question has been avoided for more than a decade. Lord Nimmo Smith’s 2013 commission found Rangers guilty of extensive and deliberate non-disclosure of player-payment arrangements, yet imposed only a £250,000 fine on a club already in liquidation, refused to impose sporting sanctions and left every title and trophy untouched. The judgment has never stopped being controversial because it made findings of fact that sit uneasily beside its ultimate conclusion, that Rangers obtained no unfair sporting advantage. That conclusion is the centre of the argument. It is also where the report appears least convincing.

The story is not, that Rangers supporters were somehow personally culpable for the decisions of directors, executives and advisers. Nor is it that every player who accepted a contractual package from the Ibrox club was knowingly party to wrongdoing. The Nimmo Smith commission itself was clear that responsibility lay with the board and senior management of Rangers - led by David Murray. But supporters of every club are entitled to ask whether a competition can retain credibility if a club is found to have concealed contractual remuneration arrangements for years, fielded teams assembled under those arrangements, won titles, and then suffered no meaningful football sanctions because the guilty party is insolvent. That is not a grievance about the past. It is a question about the integrity of the game now.

The judgment’s central paradox

The report’s most important findings are not in dispute because they are contained in the commission’s own words. Between 2000 and 2011, Rangers entered into side-letter arrangements with a large number of professional players. It promised substantial payments into an offshore employee-benefit trust, intended to fund loans or benefits for those players. The commission held that those letters formed part of the players’ financial entitlement and should have been disclosed to the SPL and SFA.

It found that the side letters were not disclosed because the club’s senior management decided they should not be. It found that the board sanctioned the payments without obtaining legal or accountancy advice that could justify non-disclosure. It found that the disclosure rules existed to protect sporting integrity by exposing irregular or improper payments. It found that the non-disclosure was deliberate, that a decision had been made not to disclose and nobody had checked that decision with the football authorities.

Those were grave findings. They describe not an administrative error, a late filing or a technical breach at the margins of a registration system. They described a systematic policy of withholding contracts and payment arrangements from the bodies charged with regulating the competition.

Yet the commission’s summary then maked the leap which has haunted Scottish football ever since. It stated that Rangers had gained no unfair competitive advantage from the breaches, that the players were not ineligible, and that no sporting sanction should therefore be imposed. The only sanction was a £250,000 fine imposed. In practical terms, that meant a penalty on a company in liquidation, with the commission acknowledging that it was likely to be largely irrecoverable. Newco Rangers aka Sevco Scotland were subsequently not held responsible for the breaches, and the club’s titles and trophies remained intact.

There is a distinction here that has repeatedly been blurred in public debate. The report did not find that Rangers had obeyed the rules. It found repeated breaches. It did not find that the side letters did not matter. It found that they were material elements of player remuneration and should have been lodged. It did not find that the directors acted innocently. It said their assumptions were “seriously misconceived” and that the non-disclosure was deliberate. It did not find that the EBT arrangements were irrelevant to players’ decisions. On the contrary, it accepted that side letters were a “very significant part” of a player’s overall remuneration package.

The report’s own evidence contains the basis for the obvious football question. If a club can promise a player a substantial sum, tied to remaining registered with the club or to first-team appearances, and route that package through undisclosed trust arrangements, how can that not affect the club’s capacity to attract, retain and reward footballers that they would not necessarily have signed otherwise?

That is what competitive advantage means in football. It is not confined to playing an unregistered player or putting twelve men on the pitch. It is the advantage created when one club can offer a player more value than its rivals can offer under their own honest, disclosed and taxed wage structures. A football competition is not distorted only when someone scores with an ineligible player. It can be distorted months earlier, in a boardroom or a transfer negotiation, when a club creates a financial package unavailable to others.

The Nimmo Smith report’s core error was to define advantage too narrowly. It concentrated on whether non-disclosure itself caused an on-pitch sporting advantage, rather than confronting the commercial and competitive consequence of the remuneration package that had been concealed.

A sporting advantage in everything but name

The commission reasoned that there was no proof Rangers could not have used the EBT arrangements had they disclosed them properly. It also said there was no evidence about whether other SPL clubs used similar schemes. From that, it concluded that it could not find an indirect sporting advantage.

That is an extraordinarily high threshold for a sporting tribunal to set for itself. It effectively required proof not merely that Rangers used undisclosed side letters to enhance player packages, but that disclosure would certainly have stopped them doing so and that the club would otherwise have been unable to recruit the same players. Football does not work with that level of laboratory certainty. Transfer markets are not controlled experiments. Clubs compete through a combination of wages, bonuses, agents’ demands, tax treatment, reputation, and the ability to structure deals.

The relevant question was surely more straightforward. Did the side letters make Rangers’ offers more attractive to footballers than they would have been if every part of those offers had been transparently recorded in contracts, disclosed to the authorities and treated in the ordinary way? The evidence set out by Nimmo Smith points powerfully towards the answer.

The side letters specified fixed sums. They set out payment dates. Some were linked to registration with Rangers, others to appearances in competitive first-team matches. They included substantial sums for players such as Shota Arveladze, Capucho and Steven Davis. The report noted that Rangers’ contributions to the trust were entered in its accounts as staff costs and that the great majority related to players. In the year to June 2006, Rangers recorded EBT contributions of more than £9.1m alongside £16.7m in wages and salaries. That is not an incidental employee perk. It is a major component of the club’s total player-cost structure.

A letter to Steven Davis in 2011 makes the point in language more candid than any later legal argument. Rangers told him that a prior undertaking would have resulted in an additional £450,000 contribution to his sub-trust, then proposed direct payments designed to leave him with the same net result after tax. The club itself was telling a player that the trust arrangement was a valuable part of his compensation, and that it was replacing it to preserve the financial outcome.

It is difficult to square that with the claim that there was no competitive benefit. Rangers were not paying EBT sums to random members of staff unconnected with first-team performance. The arrangements were provided to footballers as part of the terms on which they were recruited, retained and rewarded. The fact that the money travelled through a trust before being loaned, or that technical tax arguments existed at the time, does not alter the footballing reality. A player offered a higher-value package is more likely to sign or stay. A club able to make such offers can build a stronger squad. A stronger squad is more likely to win matches, cups and championships. The commission recognised the first two stages of that chain but refused to recognise the third.

There is also a more fundamental point. The SPL and SFA disclosure rules were not a decorative paperwork exercise. They existed to prevent exactly this kind of uncertainty. If every remuneration arrangement is disclosed, football authorities and rival clubs can see whether payments are legitimate, whether registration requirements are satisfied, whether a club is operating outside the rules and whether financial arrangements are affecting the competitive balance. Concealment denies the regulator that opportunity.

To say the concealment created no sporting advantage because no one can now prove what the regulator might have done had it known is to reward the very act of concealment. It is a circular logic, the club withheld the documents; the authorities were unable to intervene; therefore it cannot be proved that disclosure would have made a difference. That is not a robust defence of sporting integrity. It is an invitation for future clubs to take the same risk.

The tax case that changed the landscape

The timing of the commission’s decision matters. Nimmo Smith delivered his decision in February 2013, when the First-tier Tribunal had largely found in Rangers’ favour in the so-called Big Tax Case. The commission expressly proceeded on the basis that the EBT arrangements were lawful, subject to appeal. That legal position later changed decisively.

In July 2017, the UK Supreme Court unanimously ruled for HMRC in RFC 2012 Plc v Advocate General for Scotland. It held that payments made into the trust for footballers were earnings from employment and should have been subject to PAYE income tax and National Insurance. More than £47m had been paid through the EBT arrangements to players, managers and directors between 2001 and 2010. HMRC’s own summary of the ruling stated that the scheme did not work and that Rangers should have deducted income tax and National Insurance on payments made to the EBT.

The Supreme Court judgment does not mechanically rewrite the rules that Nimmo Smith was applying in 2013. The SPL commission was not a tax tribunal, and its remit concerned football’s disclosure and registration rules rather than HMRC’s ability to collect tax. But it does fatally weaken one of the report’s key premises, that Rangers’ arrangements could be treated as lawful tax planning which, at least in theory, other clubs could have used too.

The commission had said it was not a breach of SPL or SFA rules for a club to arrange its affairs “within the law” to minimise tax. That proposition may be unobjectionable in the abstract. It became unsustainable in the particular case once the Supreme Court determined that the payments were employment earnings and should have been taxed accordingly. The difference is not semantic. It goes directly to the question of how Rangers were able to construct packages that enhanced player remunerations without bearing the normal payroll costs.

The Supreme Court’s analysis also punctures the football-world distinction between the trust and the player. It held that payment to the principal trust was, in substance, payment of the footballer’s earnings. The possibility that trustees might not create a sub-trust or make a loan did not alter the nature of the employer’s payment. That conclusion sits much more comfortably with the common-sense view that the side letters were player remuneration than with the notion that they were detached trust transactions of no competitive consequence.

This is why the later tax ruling mattered to the sporting debate even if it did not, in itself, automatically compel the stripping of titles. It exposed the fragility of the factual platform on which Nimmo Smith’s no-advantage conclusion rested. The commission was entitled to work with the tax judgment available at the time. Scottish football’s authorities were not entitled to treat the subsequent reversal as if it meant nothing.

Instead, the SPFL ultimately argued that no fresh disciplinary route remained open. Its leadership said the rules in force at the time had not provided a mechanism to punish non-payment of tax and that the Supreme Court outcome did not undermine Nimmo Smith’s decision. The league’s legal adviser, Rod McKenzie, maintained that the issue before the commission had been disclosure of contractual documents, not tax compliance, and that no new disciplinary avenue had been identified.

That may be the organisation’s legal position. It is not a satisfying answer to the sporting question. If the original decision was materially shaped by an assumption later rejected by the Supreme Court, a governing body committed to transparency should have wanted the decision reviewed, not merely defended.

The evidence Nimmo Smith did not see

The deepest controversy surrounding the report concerns the so-called Wee Tax Case and the Discount Option Scheme arrangements used before the better-known Big Tax Case. The claim made by campaigners, bloggers and analysts is not simply that Nimmo Smith got the law wrong. It is that he did not receive crucial material that could have altered his assessment of the facts.

The allegation centres on payments involving Ronald de Boer and Tore André Flo, and on the distinction between earlier Discount Option Scheme arrangements and later EBT structures. The sources supplied in support of this argument contend that Rangers administrators, Duff & Phelps, had material relating to the earlier tax liability and HMRC correspondence but did not produce it to the SPL’s lawyers during their 2012 investigation. This meant the commission treated differing schemes as a continuous and broadly lawful EBT history when the earlier arrangements carried a distinct and more serious legal character.

Those claims require careful language. They are allegations and interpretations, not judicial findings made by the Nimmo Smith commission. The commission itself found Rangers had delayed disclosure, supplied only redacted documents and failed to provide material requested by the SPL. It concluded that there was no justification for redaction and that Rangers had breached its duties to assist the investigation and produce records. The report also recorded that 12 weeks passed between the initial request and the production of redacted side letters, and that unredacted copies were only later produced at the commission’s request.

That alone should have set alarm bells ringing. A tribunal investigating concealed player agreements was dependent on information from a club in administration whose senior figures had already decided the agreements need not be disclosed. It was then asked to make definitive conclusions about the sporting effect of the scheme, despite partial disclosure, redactions and a moving tax-law background. The danger was obvious - an inquiry can only be as sound as the evidence it is given.

It has been argued that the omitted or overlooked material was not peripheral. The earlier arrangements included side letters identifying precise amounts and timing, and that HMRC’s correspondence treated the underlying tax liability as arising from payments which were not genuinely discretionary. The argument is that, if the commission had been presented with that evidence and the distinction between the schemes, it could not sensibly have maintained that all relevant EBT arrangements were regular or that no competitive advantage was obtained.

The Tax Justice Network made the same broad criticism in more measured terms. It said the commission made a “serious error of fact” by determining that Rangers gained no sporting advantage on the proposition that the relevant tax-avoidance schemes were lawful and theoretically available to other clubs. It argued that the earlier scheme had already been found unlawful and that the SFA had misled the inquiry as to the nature of Rangers’ liabilities.

The evidence aired in Craig Whyte’s criminal trial added further fuel. Sir David Murray told the court that Rangers had an outstanding £2.8m tax liability and that HMRC was demanding payment. The former Rangers owner had accepted that the club had “no defence” in relation to the liability. That does not prove every allegation levelled at every individual in the wider saga. But it undercuts any comforting suggestion that the issue was merely an obscure debate among tax specialists with no direct bearing on Rangers’ football finances.

BBC Scotland’s Tom English call for a proper investigation into Lord Nimmo Smith and his findings must be understood in that context. The demand is not for a retroactive show trial or for football supporters to appoint themselves judge, jury, and executioner. It is for the basic disciplines of good governance, to identify what documents the commission had; establish what documents were withheld, unavailable or not pursued; clarify whether the distinction between different schemes was properly presented; and ask whether the no-advantage conclusion remains tenable in light of the Supreme Court’s ruling and later evidence.

A system confident in its conduct would welcome that examination. A review could conclude that no further sporting sanction is legally available. It could conclude that title stripping would be disproportionate or procedurally impossible. But it should at least expose the evidential foundation of the original decision to proper scrutiny. The refusal to do so has converted an old scandal into a permanent crisis of confidence.

The registration loophole

Nimmo Smith’s decision on player eligibility has become one of the most misunderstood aspects of the case. The commission did not say Rangers had properly lodged all relevant agreements. It held the opposite. It found that the side letters should have been disclosed. But it accepted evidence from the SFA’s head of registrations, Sandy Bryson, that once a player had been registered, the registration remained valid unless and until revoked.

On that interpretation, a failure to lodge documents did not automatically void registration from the beginning. It could lead to revocation prospectively, but did not make the player retrospectively ineligible. Since the registrations had not been revoked at the time, the commission held that the players were eligible to play and rejected the allegation that Rangers had fielded ineligible footballers.

There is a legal coherence to that approach. Football requires a reliable register, and opponents, players and competitions need to know whether an individual is eligible at the time of a match. Retrospective chaos is not a trivial concern. But the consequence is unsettling. A club that withholds material documents can obtain registration, play the footballer and retain the benefit of the player’s performances until discovery. By the time the truth emerges, the season has gone, the trophies have been awarded and the corporate body may have collapsed.

Critics of the ruling have long argued that the wording of SPL Rule D1.13 was much stronger than the commission allowed. It required clubs, “as a condition of Registration and for a Player to be eligible to Play”, to deliver all contracts and “all other agreements providing for payment” within fourteen days. Critics say “must” should have meant exactly what it said - no full disclosure, no valid registration. The alternative reading, accepted by the commission, made an allegedly mandatory rule dependent on enforcement action that could never happen if the information required for enforcement was concealed.

That criticism does not mean the commission was legally bound to impose title stripping. But it explains why the decision continues to offend footballing common sense. If the purpose of the rule was to ensure that the authorities knew the full terms on which players were employed, why should a club be able to defeat the rule by concealing those terms successfully enough?

The most charitable reading is that Nimmo Smith was constrained by imperfect rules drafted long before anyone anticipated the precise manoeuvres used by Rangers. Neil Doncaster and other SPFL figures later made that argument, that the league did not have a general power to punish non-payment of tax, and modern rules now address tax defaults and permit sanctions including points deductions or, in extreme cases, title removal.

But that explanation is not an acquittal of the authorities. It is an indictment of their preparedness and their response. Rules may have been inadequate. The enforcement culture was plainly inadequate too. A regulator cannot declare surprise forever when it repeatedly failed to ask obvious questions about a club’s published EBT costs, player remuneration and tax liabilities.

The report noted that Rangers’ accounts openly recorded millions in EBT contributions as staff costs. It also noted that the accounts said the trust existed to provide incentives to certain employees. Scottish football’s regulators say they were not told that players were involved. But a functioning regulator should not need to wait for a BBC documentary or leaked files before asking whether a major member club’s multimillion-pound employee-trust payments had implications for player registration, remuneration disclosure and the competitive integrity of its league.

Why Celtic and other clubs wanted trophies revisited

Celtic’s position, and the view shared by their supporters and many supporters of other clubs, was never simply about adding silverware to a cabinet. It was about whether a competition’s official record should reflect the rules under which it was supposed to be played.

Rangers assembled championship-winning squads using undisclosed remuneration arrangements that made their packages more attractive, then the argument for reviewing titles is straightforward. The competition was not being conducted on equal terms. Other clubs might have paid their players conventionally, declared their full contracts and met their tax and payroll obligations. Rangers operated through a structure that, at minimum, was kept from the authorities in breach of their rules and, as the Supreme Court later held, failed as a tax-avoidance mechanism.

That does not make title stripping simple. Retrospective sporting sanctions are contentious, potentially unfair to players and supporters, and legally complicated. There is an obvious difference between a doping case, in which an individual athlete’s result is usually disqualified, and a team sport in which years have passed, players have moved on and the club’s legal identity has become part of the dispute.

Yet sporting sanctions exist precisely because some conduct cannot be adequately remedied by a fine. A financial penalty imposed on a liquidated club is not a deterrent. It is a footnote. If the sporting rewards remain untouched, then the message to other clubs is dangerous, take the risk, conceal what you can, win what you can, and hope any eventual punishment falls on a shell once the prizes have been secured.

The issue becomes sharper when considering Rangers’ own position on player recruitment. During Craig Whyte’s 2017 trial, Sir David Murray was reported to have accepted that Rangers used EBTs to help sign players they otherwise could not have afforded. That is the point at which the no-competitive-advantage conclusion becomes hardest to defend. If the arrangement helped secure footballers who were otherwise beyond the club’s financial reach, it did not merely alter the accounting. It altered the squad. And if it altered the squad, it altered the competition.

A league title is not won in a single match. It is won through accumulated advantages - a better goalkeeper, a better centre-forward, a stronger bench, the ability to retain a player through a contract negotiation, the freedom to outbid or out-package a rival. Financial doping is not confined to a breach of a formal salary cap. It is the broader practice of obtaining sporting power through resources or financial arrangements unavailable on equal terms to competitors.

That is why the Manchester City comparison resonates, even though the cases are legally distinct and should not be casually collapsed into one another. City’s guilty findings concern a different league, different rules, different alleged periods and an entirely different evidential process. No sanctions have been announced yet. But the same fundamental issue is at stake, whether sporting authorities are willing to impose sanctions that reflect the competitive harm caused by financial rule-breaking.

In the City case, commentators are already discussing fines, points deductions, expulsion and the stripping of titles and trophies. That is not because anyone should prejudge the case before the written reasons and an appeals process are complete. It is because the credibility of a competition depends on the proposition that success earned under false financial pretences cannot simply be protected by delay, complexity or commercial importance. Scottish football had its opportunity to establish that proposition. It took the cowards approach.

The commercial fear at the heart of it

The Rangers crisis unfolded during a period when Scottish football’s institutions were visibly anxious about revenue, television contracts, attendances and the prospect of losing one half of the game’s dominant commercial rivalry. That anxiety is understandable. It is also exactly why independent regulation matters. A governing body must be capable of protecting the competition even when doing so is commercially painful. Especially then.

The failure to do that leaves the governing bodies open to the charge that they protected the brand value of Rangers rather than the interests of the competition. The charge is not that every official conspired with malicious intent. There is often no need for conspiracy when institutional incentives point in the same direction. Protect the television product. Avoid the immediate financial shock. Keep the biggest fixture alive. Find a settlement. Tell everyone to move on.

But sport does not move on merely because administrators declare that it should. It moves on when supporters believe the rules apply to everyone. Scottish football never achieved that settlement because it never adequately addressed the contradiction at the heart of the Nimmo Smith ruling - repeated, deliberate non-disclosure of major player remuneration arrangements was serious enough to warrant a £250,000 fine, but somehow not serious enough to have changed the sporting contest.

The later insistence that the SPFL could do no more may be legally defensible within a narrow reading of old rules. But the broader failure remains. The league and football association had options beyond passivity. They could have commissioned an independent review after the Supreme Court ruling. They could have published the full material relied upon by the original commission. They could have addressed directly whether the Wee Tax Case evidence had been supplied. They could have explained why no referral to the SFA on disrepute grounds was pursued. They could have invited affected clubs to make representations. They could have made transparency, rather than institutional self-protection, the priority.

Instead, the episode has become a lesson in how not to govern a national sport. The rules were porous. The monitoring was inadequate. The investigation relied on incomplete co-operation from the club under scrutiny. The sanction fell on the liquidated club. The sporting consequences were insulated. The later tax judgment was treated as an inconvenience rather than a reason to revisit the premises of the earlier decision.

This is why the Rangers EBT story persists. It persists not because Scottish football fans are incapable of letting go, but because the football authorities never produced an outcome commensurate with their own findings.

A test for the Premier League, and Scotland

Manchester City’s case now presents the Premier League with a test where the Scottish football authorities failed. The facts will be determined through its own written reasons, sanctions process and appeals. Nobody should assume the outcome, and nobody should pretend that one league’s rules can simply be pasted onto another’s history. But the essential principle is clear that where financial rule-breaking is proven on a scale capable of affecting the competitive landscape, punishment must speak to sporting consequences rather than merely financial ones.

A fine can be absorbed by a wealthy club. A fine can disappear into liquidation. A fine can be portrayed as the cost of doing business. Points deductions, registration restrictions, prize-money consequences and title reviews are harder because they address the currency that football clubs actually pursue - competitive success.

The Nimmo Smith commission found that Rangers deliberately failed to disclose side-letter arrangements that were central to player remuneration. It found that the board failed to obtain proper advice. It found substantial and prolonged breaches of rules designed to protect sporting integrity. It found a £250,000 financial penalty necessary to mark the seriousness of the conduct. But it simultaneously held there was no unfair competitive advantage, no ineligible players and no case for sporting sanctions.

History has made that conclusion harder, not easier, to sustain. The wider Scottish game has been told, repeatedly, that the matter is closed. It is not closed. It is preserved in every discussion of fairness, financial regulation and sporting integrity in Scotland.

Scottish football will be watching with interest what the Premier League hits Manchester City with - as Neil Doncaster, the SPFL, and the Scottish FA sit squirming in their chairs over their failure to protect the sporting integrity of the Scottish game all to protect one of their commercial cash cows from proper sanctions.