Rangers formally placed themselves into administration yesterday, as the brinkmanship between the club and Her Majesty's Revenue and Customs (HMRC) reached the Court of Session. The Ibrox side were immediately docked 10 points, leaving Celtic 14 points clear at the top of the Scottish Premier League, and all but certain to win their first title in four years.
Rangers had lodged their intention to appoint an administrator last Monday, which allowed them 10 days to negotiate with HMRC, which is owed £4.2m from a previous tax bill and penalties, £9m in unpaid taxes since Craig Whyte bought the club last May, and a potential bill of £36.5m, which could rise to £49m once penalties and interest are added on, when a tax tribunal reaches a verdict on Rangers' use of Employee Benefit Trusts from 2001 to 2010. That decision is expected next month.
HMRC itself applied to the Court of Session in Edinburgh yesterday morning for an administrator to be appointed by the court. The judge responded by granting Rangers until 3.30pm to appoint their own administrator, and Paul Clark and David Whitehouse from the firm Duff and Phelps took control of the club in the afternoon. They will now seek to stabilise the cash flow – Whyte claims the club runs an annual £10m deficit – while trying to strike an agreement, called a Company Voluntary Arrangement, with the creditors to come back out of administration.
This course is considered unlikely, since HMRC has tended not to agree a CVA with football clubs, and the future is uncertain for the Ibrox side. The club also owes Whyte's company, The Rangers FC Group, £18m after he paid its debt to LloydsTSB Bank when he bought the club from Sir David Murray for £1 last May, and Ticketus, a finance firm which lent Rangers £24.4m against future season-ticket sales.
"We had hoped that continued dialogue with HMRC would mean that a decision on administration would not have to be taken for 10 days while all other avenues were explored," Whyte said. "It goes without saying that administrators will work towards a solution that will be in the interests of the club and its creditors. It remains our firm belief that the club's future can be secured and we hope this period of administration will be as short as possible."
As the secured creditor, it is theoretically possible for Whyte to arrange a pre-pack administration, where he receives the club's assets – the stadium, training ground, players and staff – in lieu of his debt, forms a new company and club, then applies for re-entry to the SPL, in the same manner as Leeds United did in England in 2007. There will be no return for the former owner, Sir David Murray, who expressed his regret at the turn of events, but also stressed that the club could not revert to his control.
"Words cannot express how disappointed I am," Murray said. "Contrary to recent press speculation, there is no legal mechanism for Murray International Holdings to reacquire the club."
Rangers remain nine points ahead of third-placed Motherwell, with the top two finishers reaching the Champions League qualifiers for next season. But if Rangers do notcome out of administration before 31 March, they will be unable to play in Europe next season, regardless of where they finish.
Many staff and players face losing their jobs. "The players are vulnerable," said Fraser Wishart, the PFA Scotland chief executive. "Under normal circumstances, contracts cannot be broken but administration changes all of that. Sadly, I've been through this process a number of times. The big difference here is the amount of money owed to the Revenue."
SPL top three
*Rangers docked 10 points for entering administration