Taxman to net £1bn from football clubs

HM REVENUE & CUSTOMS stands to gain £1bn from football's Premier League, according to Deloitte's 20th annual Football Finance review.

Tax generated from the Premier League will break the billion-pound barrier possibly as soon as 2010-11 due to rises in VAT and the introduction of 50% rate for earnings over £150,000.

However, the report warned that risks taken by some boards of directors will, if left uncorrected, lead to more insolvency cases in the coming season, with HMRC one of the last to be paid in an administration.

Pre-tax losses rose to £445m in 2009-10 compared to £275m for the previous season.

Europe

The UEFA financial fair play regulations will require clubs competing in UEFA competitions to aim to break even, with potential sanctions looming from the 2013-14 season for non-compliance

The report said that "English football bodies have expressed support for the principles of financial fair play and there is now some initial discussion about developing some form of break even requirement at a domestic level."

Alex Byars, senior consultant in Sports Business at Deloitte, said: "The record pre-tax losses of £445m in 2009-10 are a concern, particularly as credit is likely to remain less available to football clubs than it was two or three years ago.

Premier League clubs' revenues reached a record £2bn in 2009-10 and will have exceeded £2.2bn in 2010-11 under new broadcast deals.

The challenge is for clubs to continue to convert impressive revenue growth into sustainable profits that allow for investment in both infrastructure and talent.

Alan Switzer, director in the Sports Business at Deloitte, said: "While revenues have held up well, a wages-to-revenue ratio of 88% is a cause for concern and will need to be addressed by Championship clubs, particularly given that Football League clubs have been put on notice about the need to rein in their spending due to the forthcoming 25% reduction in the value of live TV rights effective from 2012-13.

Other key findings of the review include:

• Premier League clubs generated the highest revenue in Europe with £2bn in 2009-10, followed by Germany with £1.4bn, Spain and Italy each with £1.3bn, and France £900m.

• Net debt in respect of Premier League clubs also fell by 20% to £2.6bn in 2009-10 from £3.3bn in 2008-09 due to a number of factors including debt-to-equity conversions and property sales.