87 EBT for 87 Brothers

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The response to my previous article has been overwhelming. The majority of the comments ask pertinent questions. This article will be an attempt to answer the majority of these questions. The EBT set up is a simple one to understand. Let’s take the example of Barry Ferguson. He received a £2.5m ‘loan.’  The holding company that owned a controlling interest in Rangers, Murray International Holdings Ltd (MIH), deposited £2.5m in a Jersey Trust Fund. This trust fund at the behest of MIH transfers this amount to a sub trust. Mr Ferguson then applies for a ‘loan’ from the sub trust for the full amount. Mr Ferguson is informed that this ‘loan’ will never be repaid.

However Mr Ferguson has an agent who is fully aware that this tax avoidance enterprise could have a sting in its tail. He therefore insists on a side letter to both ensure that his client receives the full amount, and that MIH indemnifies his client should HMRC later issue a tax demand. MIH Ltd have been liquidated. There was no insurance policy, as the issue of the side letters invalidated the EBT as a tax avoidance vehicle, as would be the case in the highly unlikely event that an insurer could be found to offer indemnity.

At this juncture we must return to the issue of participation. The 87 recipients of EBT applied for ‘loans’ from the sub trusts. Forty-five of them, including Mr Ferguson, have side letters. Mr Ferguson, whose agent insisted on written confirmation of this deal, is actually participating in an unlawful enterprise. However he was not concerned as he knew that Sir David Murray, a knight of the realm, would bail him out should HMRC come calling.