Taxman challenges Premier League over creditor rules
Revenue says the taxpayer is being short-changed
Sunday 13 February 2011
The taxman is poised to tackle the football Premier League in a court battle that critics fear could put dozens of clubs out of business. HM Revenue & Customs (HMRC) is challenging the controversial rules that require clubs in financial trouble to pay off their debts to players, managers and other football clubs first – before paying creditors outside the game.
HMRC says the rule is unlawful and short-changes the taxpayer. A recent case, it says, resulted in financially strapped Portsmouth paying only £4.8m of an outstanding tax bill of £24m. If the taxman wins, the ruling could apply to Football League clubs as well.
The Premier League, which represents many of the sport's richest clubs, will ask the High Court on Tuesday to rule that the taxman's challenge is a foul and throw the case out.
The verdict will have a dramatic impact on the way football's business side is conducted. Some fear it will lead to financial chaos and will mean hard-up clubs going out of business.
Brendan Guilfoyle, of the insolvency specialist P and A Group, said the change would curb transfer market frenzy, such as Fernando Torres's move from Liverpool to Chelsea for a UK-record £50m fee. He said the deal, which will see Chelsea pay in five equal instalments over Torres's five-year contract, was underpinned by the football creditor rule.
"I question whether clubs would be prepared to pay as much if they had to pay the whole fee at the time of the transfer," he said. "Would Liverpool be prepared to lend Chelsea £40m without the protection of the football creditor rule?"
Others applaud the taxman's legal challenge, arguing that it will help to bring transparency to the sport's murky finances and force football to live within its means.
Critics argue it is unfair that a player, manager or other football club is more deserving of being paid than other creditors. When Bradford City collapsed in 2002, 36 workers in the club's shops were sacked, while money was owed to the St John Ambulance charity, which provided medical assistance at games; meanwhile, the club's players, including one on £40,000 a week, had to be paid in full.
Football's authorities argue that the rule protects the national game's stability and integrity. It helped Watford avoid acute financial difficulties when Portsmouth recently got into trouble. Portsmouth owed their fellow Championship club money for the transfer of the striker Tommy Smith. If the debt had not been settled, Watford might also have been forced into administration, having an impact on more small businesses and ultimately, the taxman, they argue. Revoking the rule could prompt "a domino effect", they warn.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Simon Read: Frozen in time - the expat British pensioners who deserve a better deal
Donald MacInnes: My wasted hours in the retail deserts of Dixons-Carphone
Bargain Hunter: From The Outsider to 1984, catch a cut-price classic, read it in the rye
Money Insider: Smart alternatives to the pensioner bond
Bank-beating exchange rates on your international payments
- 1 Paris attacks: Do not call Charlie Hebdo killers 'terrorists', BBC says
- 2 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
- 5 The enemy within: People who hear voices in their heads are being encouraged to talk back
Nigel Farage: NHS might have to be replaced by private health insurance
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
George Galloway condemns 'racist, Islamophobic, hypocritical rag' Charlie Hebdo at freedom of speech rally
iJobs Money & Business
£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...
£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...
£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village