Scrap super creditor rule, says select committee

SUPER CREDITOR RULES in football administrations should be scrapped a parliamentary committee has said.

The Culture, Media and Sport Committee has suggested if HMRC is unsuccessful in its bid to tackle the rule through its up-coming legal challenge, the government should legislate against it.

The taxman is due to begin a court battle to have the football creditor rule (FCR) – which prioritises the payment of players, managers and clubs in the event of a club entering administration – overturned, as it believes the rule is “unlawful”.

If a club enters administration the football creditors are paid in full with the remaining funds divided between the creditors, treating them differently.

In the Portsmouth FC administration, for example, players and managers were paid in full. However, the taxman and several other creditors are likely to receive 20p for every pound they are owed, repaid over five years.

The committee’s report said the rule “epitomises the extent to which financial priorities are being distorted”.

An HMRC spokesman said it was “good news” and the taxman hopes it will be able to dissolve the super creditor rule through the courts or legislation.

A spokesman for the Premier League said: “We, along with the other football authorities, will now consider the report’s contents and await the Sports Minister’s response before taking a view on the recommendations and any part the Premier League may have to play in implementing them.”

John Whittingdale MP, chair of the committee, said: “Almost all our recommendations could be achieved without legislation, through co-operation and agreement between the football authorities, and we urge them to respond positively with an agreed strategy and timetable for change.

“Legislation should be considered only as a last resort in the absence of substantive progress.”

HMRC is due to face the Football League over its challenge of the insolvency rule in November.

Other suggestions made by the committee include “urgent reforms” to football governance to become more vigorous in reducing debt levels and improve financial stability.

Related reading