HMRC on the attack

The taxman is planning one more attempt to overturn football’s super creditor
rule – the article of faith that insists all managers, players and clubs should
get their money from a football insolvency before any other creditor, including
HMRC. At the centre of that court room attack will be Greg Mitchell QC.

What’s happened?

While football fans focus on England’s chances in the World Cup they will
probably lose sight of the woeful state football finances find themselves in
here in the UK.

Indeed the administrations of Crystal Palace and Portsmouth, the only Premier
league club to go bust, are now into extra time. But there is one crucial phase
for this particular game to go through – HMRC’s attempt to overturn the super
creditor rule. Captain of this court room team will be Greg Mitchell of the
chambers Three Verulam Buildings.

News of the latest attempt to finish the rule the taxman regards as
“unlawful” emerged in the report from administrators on their plans to rescue
Portsmouth.

HMRC became particularly aggressive in its statements saying: “There is no
legal basis for the football creditor rule. Non-football creditors are being
seriously short-changed and enough is enough.”

Mitchell is the man leading this legal battle. He has represented HMRC in the
early stages of its dealings with Portsmouth. His CV says he “enjoys dealing
with cases which have a substantial technological aspect”. His core areas are
commercial litigation and corporate insolvency, which should give him a strong
hand because in his fight for HMRC he will come up against the Premier League
which will no doubt hire top lawyers itself.

What happens next?

Mitchell will no doubt examine the two key principles. Firstly, the pari
passu principle which dictates that all creditors should be treated on an equal
basis and, secondly, the anti-deprivation principle which says that no one
should be deprived of their assets because of an insolvency.

The court room arguments will be intense because somehow the Premier League
will have to argue it can stand outside these well-established principles. But,
as experts have already pointed out, a win by Mitchell for HMRC, could force
major changes in how clubs are run and deal with each other. For one thing, if
selling a player, a club will need to know it will receive its money – this
means proper credit checks. It also means the introduction of, for want of a
better term, moral hazard into the transfer process.

No longer will clubs be able to rely on the super creditor rule underwriting
transfers. They will have to undertake transfers on a proper business basis.

Football may be a funny old game, but not as far as the taxman is concerned.