LONDON (Reuters) - Former Scottish champions Rangers face a three-year ban from European competition after the British tax authorities rejected a plan on Tuesday to settle the stricken club's liabilities.
The decision leaves the Glagow club's parent company facing liquidation. Administrators who have been running Rangers since February said the 140-year-old club would survive and continue to play at its Ibrox stadium.
However, other clubs in the Scottish Premier League will have to give their blessing for Rangers to remain in the top tier of Scottish football.
"HMRC (UK tax authority) has taken the view that the public interest will be better served with the liquidation of The Rangers Football Club plc as a corporate entity," said Paul Clark, the joint administrator.
"The club will continue to operate as it has always done but within a new company structure."
Rangers, one of the biggest names in British football and Scottish champions a record 54 times, went into administration four months ago over 9 million pounds ($14 million) in unpaid taxes.
They face a much higher bill over a separate tax dispute relating to payments to players over the past decade.
A group led by former Sheffield United chief executive Charles Green has agreed to take over the club. But its proposal to settle the club's debts with a part payment, known as a Company Voluntary Agreement (CVA), has been deemed insufficient by the tax authorities.
HMRC said its decision to push for liquidation would ensure taxpayers got more of their money back and help to uncover how Rangers had got into such a mess. It said the sale to Green's consortium could still proceed.
"A liquidation provides the best opportunity to protect taxpayers, by allowing the potential investigation and pursuit of possible claims against those responsible for the company's financial affairs in recent years," a spokesman said.
"It also means that the new company will be free from claims or litigation in a way which would not be achievable with a CVA. Rangers can make a fresh start."
Scottish businessman Craig Whyte paid a nominal one pound to take an 85 percent stake in Rangers in May 2011, inheriting a club already weighed down by debt and the tax dispute.
Scottish football is dominated by Rangers and city rivals Celtic, who reclaimed the league title last season for the first time since 2008.
Scottish Premier League fixtures for the 2012/13 season are due to be published on June 18, ahead of an August 4 kickoff. ($1 = 0.6447 British pounds)
(Reporting by Keith Weir; Editing by Robert Woodward)