HMRC calls for administration at Southend United

Football club Southend United has 14 days to prove it is solvent or face administration, a court heard yesterday.

The club was handed a stay of execution by the courts yesterday, despite HMRC seeking the appointment of administrators.

HMRC petitioned the High Court to wind up Southend United yesterday for non-payment of £238,710 in tax.

Southend United is also facing another winding up petition next week from Charterhouse Commercial Finance for £140,000.

HMRC said the club's history of failing to pay its taxes demonstrated it was insolvent.

The High Court has given the club until 2 August to prove it is solvent and able to continue trading.

The club said in court it had paid tax, albeit late, and was due to receive transfer payments of more than £180,000 for selling midfielder Nick Bailey.

A source close to the case told Accountancy Age, the tax office was getting tough on clubs from the Premiership down to the smaller clubs. He said petitions added weight to its challenge of the Football Creditors Rule against the Football Association Premier League.

The Football Creditor Rule entails football creditors, including the players, being paid in full first if a club enters administration, ahead of the taxman and banks. HMRC, which decribe the rule as "unlawful" filed a writ against the rule in May.

The football club has faced two other winding up petitions from the tax office in the last 12 months, one in November for £690,000, and one in April for £400,000 – all were paid the BBC reported.

An HMRC spokesman said: “HMRC doesn’t initiate insolvency action against football clubs or any other business lightly but we will not hesitate to do so when that is the right way to protect the country’s tax revenues and other creditors from those who trade whilst insolvent and run up debts that they simply cannot pay.

“Ensuring tax is paid on time should be at the centre of football’s business strategy just as it should be for any other enterprise. Any business that regards paying tax as an optional extra after other expenses are met or that uses tax collected from employees or customers as working capital is potentially heading for trouble."

Further reading:

HMRC tackles Premier League football creditor rule

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Football star Colin Hendry declared bankrupt

Football League agrees Stockport sale out of administration