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02 Jun 2010
The taxman is taking the Premier League to court in what is another attack by HM Revenue & Customs against the controversial football creditors rule.
Accountancy Age has learned that HMRC filed a legal writ against the Premier League on 18 May.
Currently if a club enters administration they are bound by the football creditors rule, meaning some creditors such as players and managers will be paid in full from the administration and the remaining payments divided between the unsecured creditors including HMRC.
The tax office said that due to the duty of confidentiality it could not comment on individual cases, but made no secret of its disdain for the football creditors rule, labeling it "unlawful".
"HMRC‘s view is that there is nothing in insolvency legislation that provides for unsecured debts due to “football creditors” to be paid in preference to other unsecured creditors such as HMRC.
"Our view is that the practical application of the so called 'Football Creditors Rule' may be unlawful. We have nothing further to add at this stage."
In the Portsmouth administration the football creditors are expected to receive their full repayment of £22.4m funded by the Premier League’s deductions in the club's allocated TV revenue. However, unsecured creditors who are owed an estimated £83m are expected to be repaid around £16.5m over the lifetime of the CVA - usually five years.
In the CVA proposal document administrators claim that HMRC is taking action against the unfair advantages by football creditors.
"It is understood that a separate action is being initiated by HMRC against the football creditors rule, it is therefore not intended that a challenge to the football creditor rule will be undertaken by the future liquidators of the original company," it said.
The Premier League declined to comment on the details of the legal case.
UPDATE:
A spokesman for HMRC earlier today said: “There is no legal basis for the football creditor rule. Non football creditors are being seriously short changed and enough is enough.”
Further reading:
Portsmouth CVA sees HMRC chase image rights payments
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Visitor comments Add your comment
About Time Too
This rule and the application of such a rule allows football clubs to spiral out of control as it artificially inflates wages and transfer fees (especially staged payments) as the selling club knows it will get paid irrespective of all other normal and commercial pressures a club may have.
I simply can not create a cartel within my own industry and have a blanket rule that we will operate without any commercial principles and trade amounst ourselves knowing full well that we will all get paid and the general public will have to fund any losses.
I fully understand that a footballers career is short and I do not care what they earn providing that it is sustainable for the club
Posted by: Steve Walton, 02 Jun 2010 | 00:00
Not workable
It certainly leads to an unfairness to unsecured creditors. However, the reason behind the football creditors ruling is that the FA will not allow a club to play in their leagues if any football monies are outstanding. No league place means no income for the club which means liquidation (which means no player registrations nor parachute payments) - which means the payout to creditors from Liquidation is minimal. Also, in a situation similar to Pompey, I'm sure that the Premier League would simply alter their rules so as no (parachute) payments would go to a club in administration and instead would be retained within the league (to be shared out as they see fit to other clubs)...
Posted by: Gaz, 02 Jun 2010 | 00:00
Football is not above the law
Gaz - there is no reason why football creditors should have a special position here. Just as there is no reason why FIFA should be given tax exemption for the world cup (as they have asked for).
Why should other businesses and taxpayers suffer more so that the richest game in world can protect their own? If the Premiershi* threatens to take the action you suggest they should be be fined as would any other cartel.
Posted by: David in Teddington, 09 Jun 2010 | 00:00