IPs support HMRC action against football creditors rule

Insolvency practitioners are rallying behind HMRC’s legal challenge to change
the Football Creditors Rule (FCR) in football administrations.

revelation of the taxman’s court action against the
Premier League, many in the profession believe the current rule gives an unfair
advantage to football creditors and support a change – which would allow a more
even “playing field” if a club finds itself in financial crisis.

Currently if a club enters administration they are bound by the FCR, 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.

HMRC said there was no “legal basis” for the football creditor rule, adding
“non football creditors are being seriously short changed and enough is enough.”

Philip Long, an IP and partner in corporate recovery at PKF, said HMRC “has a
chance” to change the rules following legal action filed on 18 May 2010, against
the Premier League challenging the FCR.

Long said: “It (FCR) really is something that needs to be sorted out once and
for all.”

He added although the business model needs to change the ramifications could
mean cash flow problems for clubs as banks are not “always happy to fund
football clubs”.

One senior IP, who has worked on football administrations in the past, said a
change to the business model could level the playing field for creditors of
football clubs and “why should football creditors receive preference?”

The IP also speculated that financially solvent football clubs would not be
particularly affected by any changes.

Further reading:

tackles Premier League football creditor rule

CVA shakes up FC insolvency rules

FC heading for groundbreaking deal

Related reading