HMRC tackles Premier League football creditor rule

The taxman is taking the Premier League to court in what is another attack by
HM Revenue & Customs against the controversial football creditors rule.

Accountancy Age has learned that HMRC filed a legal writ against the
Premier League on 18 May.

Currently if a club enters administration they are bound by the football
creditors rule, 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.

The tax office said that due to the duty of confidentiality it could not
comment on individual cases, but made no secret of its disdain for the football
creditors rule, labeling it “unlawful”.

“HMRC‘s view is that there is nothing in insolvency legislation that provides
for unsecured debts due to “football creditors” to be paid in preference to
other unsecured creditors such as HMRC.

“Our view is that the practical application of the so called ‘Football
Creditors Rule’ may be unlawful. We have nothing further to add at this stage.”

In the Portsmouth administration the football creditors are expected to
receive their full repayment of £22.4m funded by the Premier League’s deductions
in the club’s allocated TV revenue. However, unsecured creditors who are owed an
estimated £83m are expected to be repaid around £16.5m over the lifetime of the
CVA – usually five years.

In the CVA proposal document administrators claim that HMRC is taking action
against the unfair advantages by football creditors.

“It is understood that a separate action is being initiated by HMRC against
the football creditors rule, it is therefore not intended that a challenge to
the football creditor rule will be undertaken by the future liquidators of the
original company,” it said.

The Premier League declined to comment on the details of the legal case.

UPDATE:

A spokesman for HMRC earlier today said: “There is no legal basis for the
football creditor rule. Non football creditors are being seriously short changed
and enough is enough.”

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