THE taxman today won its latest challenge on the "big tax" case against Rangers.

A court ruled Rangers' EBT payments "were taxable earnings" in the latest round of the long-running battle.

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Her Majesty's Revenue and Customs (HMRC) launched a second appeal after earlier court decisions ruled in favour of the Ibrox club.

The case centres on payments made by former owner Sir David Murray's group of companies.

But today's ruling does not mean the so-called big tax case is over as Murray International Holdings could well choose to take a final appeal to the UK Supreme Court.

Today's decision means the taxman has won its latest challenge over its claim Rangers were liable for a £46.2 million bill over the use of loans to make payments to players, managers and staff.

In what is one of the biggest tax claims it has ever pursued, HMRC went to the Court of Session in July to contest a decision of upper tier judge Lord Doherty in largely dismissing an appeal against a first-tier tax tribunal (FTT) decision in the so-called Big Tax Case.

In his verdict, Lord Drummond Young said: “It seems to us to be self-evident that the obligations in the side-letter were part of the employee’s employment package, and provided him with additional remuneration.

"They were negotiated as part of the total employment package. Once it is accepted that the bonus payments represented consideration for a footballer’s services qua employee, it inevitably follows that those payments represented emoluments or earnings of the footballer in question.

"On the foregoing basis, we are of opinion that the sums received by the trustee of the Principal Trust and in due course by the trustees of the sub-trusts amounted to a mere redirection of income and thus constituted emoluments or earnings of the employees in question,"

"That accords with common sense.

"If the law were otherwise, an employee could readily avoid tax by redirecting income to members of his family to meet outgoings that he would normally pay: for example to a trust for his wife...or to trustees to pay for his children’s education or the outgoings on the family home."

The challenge concerns the company which ran Rangers until 2012.

HMRC argued that the use of Employee Benefit Trusts (EBTs) were a way of paying players, managers and other staff and should be taxable like all salaries.

But Sir David Murray's Murray International Holdings (MIH), which formerly owned Rangers, had twice successfully argued that they were loans and therefore exempt.

The judgement today accepts the HMRC view and has overturned previous rulings on appeal.

HMRC had maintained that the effect of previous tribunal decisions in the case is that employees can avoid paying income tax by agreeing that payments be made to others of their choosing, rather than getting the money themselves.

It is understood the prospect of a massive debt that Rangers could not handle led to Lloyds Banking Group insisting £18 million in club debts were cleared, for fear that they would lose millions if it went into liquidation.

That led to Sir David Murray's sale to Craig Whyte.

Gers fan groups have previously accused the HMRC of wasting millions of pounds of public money in its "witch-hunt".

They have also raised questions over why HMRC began to target the club in the spring of 2010, nine years after the club starting using the scheme and as EBT loopholes were being closed through legislation.

In 2014, a judge dismissed HRMC’s first appeal against a first-tier tribunal (FTT) majority verdict which had decreed that a £46.2m tax demand on Murray’s company be “reduced substantially”.

The use of EBTs relate back to Murray's time in charge of the Ibrox club before he sold his controlling stake in the club to Whyte for £1 in May 2011.

Rangers were subsequently forced into administration under Whyte's control and placed into liquidation in February 2012.

A Charles Green-led consortium bought the liquidated assets of the club in June 2012.

HMRC argued the payments should be taxable but Murray's International Holdings argued they were loans and therefore exempt.

Timeline:

 

2001: Rangers begin making payments through an Employee Benefit Trust (EBT), which was set up by major shareholder Murray International Holdings (MIH).

2006: The club's annual report reveals a £9.2million ''contribution to employee trusts'', the high point of the payments. The sum was included in staff costs of £28million.

2010: April 27 - Rangers confirm they are under investigation by Her Majesty's Revenue and Customs (HMRC) over payments to players from 2001. Rangers say they will ''robustly'' defend the case, which becomes known as the "big tax case".

December - EBTs are outlawed under new legislation.

2012: January 18 - A three-day First Tier Tax tribunal closes in Edinburgh, following earlier hearings to determine whether Rangers are guilty of tax evasion.

February 14: Rangers enter administration.

March 2 - The Scottish Football Association confirms it will investigate claims made by former Rangers director Hugh Adam that payments made to players were not disclosed to the governing body.

March 5 - The Scottish Premier League instigates an investigation into the alleged non-disclosure of payments made to players by Rangers, which prompts the SFA to drop its case.

May 23 - A BBC documentary claims 63 Rangers players and 24 staff members received EBT payments and says 53 of them were provided with ''side letters'' detailing the structure of payments.

May 31 - Rangers' administrators Duff and Phelps provide files requested by the SPL for its probe.

June 14 - Oldco Rangers are consigned to liquidation after HMRC rejects a Company Voluntary Arrangement proposal. Charles Green's Sevco Scotland company buys the club's assets and business, then begins the process of relaunching the club as a new company.

August 2 - The SPL appoints an independent commission to probe the contentious payments.

August 6 - Murray denies cheating took place during his stewardship.

November 20 - Oldco Rangers win the first-tier tax tribunal case in principle.

2013: January 29 - The SPL commission begins hearing evidence.

February 28 - Rangers are handed a fine of £250,000 for breaching rules over disclosing payments, but the club avoid being stripped of titles after the commission finds they obtained no sporting advantage.

2014: July 9 - HMRC's appeal to the Upper Tier tribunal is largely dismissed.

2015: November 4 - HMRC wins its second appeal in the Court of Session. Three judges rule that the payments were earnings subject to tax.