BusinessBusiness RecoveryQuicksand of insolvency

Quicksand of insolvency

The Inland Revenue's recent treatment of football clubs is beginning to become a worry for many, as they accuse it of throwing its weight around to take as much money as it can out of an administration. MPs have even joined the fray recently by complaining to government ministers about the fairness with which the Revenue has treated some clubs.

But the fact is that the Revenue has been largely lenient with ailing clubs for years, certainly more willing to help football clubs than it does insolvent companies.

In pressuring the Revenue to change its treatment of football clubs, the critics are side-stepping the real issue and the deep-seated problem that led to so many football insolvencies in the first place – the football ‘super creditor’ rules.

In this case, it is the Football league that is the real bully, forcing ailing clubs with low revenues to continue paying disproportionate wages to players. When many of these wages were put in place, the clubs had much higher incomes than they do now.

But now revenues are lower, clubs that cannot sell their players – of which there are many – are being forced by the league to continue paying astronomical wages. Companies that are run in this way usually end up in compulsory liquidation, despite the benevolence of the current rescue culture.

Through all these rules, the Revenue has mostly used kid gloves and acted leniently and helpfully to many clubs, especially in the wake of the collapse of ITV Digital last year. In the end, why should taxpayers help subsidise clubs that are run so badly?

Why should we help pay for players that get more than £40,000 to sit on the bench or play poorly?

Instead of hitting out at the Revenue for asking for a decent return on its debt, MPs should be concentrating on the real issue, putting pressure on football’s governing bodies to get rid of the artificial ‘super creditor’ rule, which is, after all, not the law of the land.

While this rule remains in place, football clubs will continue to walk a financial tightrope and fall into the quicksand of insolvency.

  • Adriana Zea, staff writer of Accountancy Age.

Related Articles

Carillion collapse: The week so far and industry reaction

Business Recovery Carillion collapse: The week so far and industry reaction

2d Emma Smith, Managing Editor
Kingston Smith & Partners appointed trustees in bankruptcy of ex-Newcastle United footballer

Business Recovery Kingston Smith & Partners appointed trustees in bankruptcy of ex-Newcastle United footballer

2d Emma Smith, Managing Editor
Carillion: PwC appointed as special managers – what happens now?

Business Recovery Carillion: PwC appointed as special managers – what happens now?

4d Emma Smith, Managing Editor
Investment firm acquires Avon Steel Company Limited

Business Recovery Investment firm acquires Avon Steel Company Limited

1m Emma Smith, Managing Editor
Manchester law firm enters into administration

Business Recovery Manchester law firm enters into administration

1m Emma Smith, Managing Editor
KPMG appoints new global head of insolvency

Business Recovery KPMG appoints new global head of insolvency

2m Emma Smith, Managing Editor
EY hired by Carillion to review finances

Accounting Firms EY hired by Carillion to review finances

6m Alia Shoaib, Reporter
Using insolvency as a debt recovery tool

Business Recovery Using insolvency as a debt recovery tool

7m Emma Smith, Managing Editor