HMRC faces "millions" in costs if Portsmouth appeal fails

The taxman could face a multi-million pound bill if it fails in its appeal, expected to be filed at court today, against the Portsmouth FC company voluntary arrangement (CVA).

Should the appeal fail administrators said they would "pursue HMRC for costs and potentially for any loss suffered by the creditors".

Administrators said they had lined up a buyer for the club. The appeal will delay the sale and potentially kill the deal, even if HMRC fails, as costs mount each day the club is not sold.

"This could amount to millions should the current purchaser withdraw," administrators told Accountancy Age.

HMRC has told Portsmouth administrators it would appeal the CVA ahead of today's
deadline.

In a statement, administrators at Portsmouth FC said: "HMRC have advised …they are appealing the outcome of the CVA meeting."

HMRC voted against the CVA at the creditor meeting held in June. A CVA needs 75% or more of creditors, by value of their claims, to vote in favour for its approval.

At the creditor meeting, in which the CVA was approved, voting was 81.3% for and 18.63% against.

As part of the CVA for the former Premiership side, the club will repay creditors approximately 20p in the pound over the next five years. After nine months the "business of football" which includes players, will be transferred to a new company and the old company will enter liquidation. This will allow administrators to investigate the books at Portsmouth FC to ensure no " antecedent" activity took place, essentially forms of fraud.

The new club will continue to make CVA payments to the old company.

Peter Kubik, joint administrator for Portsmouth, said: "If HMRC is successful in its appeal the administrators may be forced to sell the club in administration meaning a 15-17 point reduction for the Championship side. This could dramatically affect the return to creditors."

Joint administrator Andrew Andronikou is reported to have said an appeal may not be heard until October or November this year.

An appeal can be retracted before its court date.

Andrew Andronikou, Peter Kubik and Michael Kiely, from UHY Hacker Young, were appointed joint administrators to Portsmouth FC on 26 February.

An HMRC spokesman said: "If the appeal is unsuccessful then it would be normal for the court to order HMRC to pay the joint administrators reasonable legal costs. HMRC would not expect these costs to 'run into millions'.

"If the joint administrators were to seek to claim an unreasonable amount, HMRC would have the right to ask the court to rule on what amount would be reasonable."

Further reading:

Portsmouth FC CVA approved

Breaking news: HMRC to veto Portsmouth CVA

Cardiff City FC battling PAYE winding up