The revenue are currently writing to players enquiring as to their tax status to ensure income has been taxed correctly and at the correct time. They are interested in the club and not the players at the moment.


Rangers accounts for 2009 disclosed their EBT under the guise of The Murray Group Management Ltd. Remuneration Trust. Note 6 staff costs read as follows;



The Murray Group Management Ltd. Remuneration Trust was established to provide incentives to certain employees and other service providers. Payments to the Trust are charged to the Group Profit and Loss Account in the year incurred.


What is an EBT?

An EBT is a trust set up by an employer for the benefit of employees (including directors) and former employees.


An EBT is normally funded by an initial contribution plus a series of periodic contributions. Such contributions are at the discretion of the club and for the benefit of the players.


As well as receiving contributions from Rangers, the EBT trustees may be empowered to augment trust funds by borrowing from the employer or from banks etc and by accumulating income.


The following benefits may also continue to be provided by EBT’s:-

• Provision of lump sum payments in respect of death or injury arising from accidents occurring during service (these

benefits are usually insured).

• Permanent health insurance to provide regular payments to employees unable to work through illness.

• Medical insurance

• Discretionary bonuses

• Loans, either interest free or interest bearing which may be repayable out of salary, or at the end of a fixed period or on

leaving employment.

• Holiday homes for use by a number of employees.

What’s the Point?


Tax Relief on Loans


The player is unlikely to be required to pay interest, they will also receive personal tax relief on the sum that they have borrowed. If, for example, the recipient of the loan is a higher rate taxpayer, they will be required to pay only 2.2% in income tax each year. This starkly illustrates the benefits of these loans; if the same employee were to take the sum as, for example, a bonus rather than an EBT loan, they would be required to pay income tax at 40% as well as National Insurance Contributions.


Although there is considerable tax relief available on interest free loans, it is important to remember that in some instances you may still be required to pay income tax. Although the loan itself is subject to tax relief, the purchase that you make with the loan is counted as a benefit-in-kind and may therefore be taxable. It is likely that you will have to pay Class 1A National Insurance Contributions on the cash value of your purchase; whether or not you will also be required to pay income tax will depend on the nature of the purchase.


All along the club will be claiming corporation tax relief on the payments made.


Interesting that the following was taken from Arsenals accounts for 2005.


Tax charge of £11.0m (2004 – £2.4m) at an effective rate of 57% (2004 –23%) .


“The effective rate of tax is a consequence of provisions made to deal with a recent House of Lords ruling on the deductibility for corporation tax purposes of contributions made by companies to Employee Benefit Trusts (“EBT”). The Group has used an EBT, as part of their remuneration arrangements, for a number of years and claimed a corporate tax deduction for the contributions made in line with the then current law. We are reviewing the House of Lords ruling and assessing its impact on the Group, however, we believe it is prudent in these accounts to reserve for the tax which may become payable in the event that tax relief for the Group’s past EBT contributions is denied.”


Arsenal will not be alone amongst Premier League clubs in setting up EBT’s.
The principle of EBTs will be to make tax-free payments or payments with only the basic rate tax deducted to certain individuals. Re-reading the above paragraph, it would appear that the Inland Revenue are not going after the individual but the club. 
What does the provision consist of – 100% of the potential tax payable? What about interest on the tax not paid on time, has this been provided for? Have the club been in discussions with the Revenue on this point?

The impact of the House of Lords ruling on EBT will have an impact on player negotiations going forward…