Court tax victory boosts Portsmouth FC

By John Aston,Press Association
Sunday 23 October 2011 03:40

Hopes for the survival of cash-strapped Portsmouth Football Club rose today after it won a High Court battle with the tax man.

HM Revenue and Customs attempted to block a proposed Company Voluntary Agreement (CVA) put together by the club's administrators to help it out of administration and settle its debts.

But today the High Court ruled in favour of the administrators.

Mr Justice Mann said: "I propose to find in favour of the company administrators and dismiss the application of HMRC."

The judge said the CVA would stand and the administrators were free to find a buyer for the club.

HMRC said it was "disappointed" but would not appeal.

Portsmouth chief executive David Lampitt expressed his "delight and relief" and described the ruling as "a massive step forward in the process towards getting this great club back on its feet".

Speaking outside court, Peter Kubik, one of the joint administrators, said: "It's very good news, we're very relieved". The next step was to "get on trying to sell the club."

Hong Kong-based businessman Balram Chainrai, who put Pompey into administration in February, is reported to want to be the owner for a second time.

Mr Kubik said the administrators currently had "one and one only" potential buyer.

But he added: "Now that the issue of this (HMRC) challenge has gone away, there may be some more out there."

Asked if it could have been the end for the club if the HMRC application had succeeded, he said: "It may not have been the end, but it was a very real prospect that it could have been the end."

Mr Chanrai's representative Ashok Patel said outside court: "We are, of course, very pleased with the decision because we are the only purchaser the judge mentioned in his judgment.

"Mr Chainrai was very happy because it opens the way for the only realistic solution, which is for his company to purchase the club and stabilise the club and to continue in the Championship."

The taxman argued at a two-day hearing this week the CVA was "unfair and seriously flawed" as it gave preference to football creditors, including players, who were able to claim up to 100% of monies owed them, while other creditors, including the Revenue, would receive much less.

Gregory Mitchell QC, appearing for HMRC, said that, under what was known as the Football Creditors Rule: "One class scoops the pool and the rest are left out in the cold."

HMRC also argued it was owed £13 million more than the £24 million value put on its claim.

The administrators disputed the accuracy of the taxman's figures and assessments, and today the judge ruled in their favour.

Later HMRC said in a statement: "HMRC is naturally disappointed not to have won this appeal and we can confirm that we do not intend to appeal.

"Our aim when pursuing debt of any kind is to achieve a fair outcome for the taxpayer and we will take this forward in the wider context of the football industry through separate and outstanding legal proceedings over the status of the so-called Football Creditors Rule."

The case was fast-tracked through the courts before the start of the football season.

Pompey were docked nine points for becoming the first Premier League club to go into administration and relegated to the Championship, the highest tier of the Football League, at the end of last season.

Richard Sheldon QC, appearing for the administrators, said other Premier League clubs "wanted Portsmouth to go to the wall and divide all the TV money among themselves" when its financial problems were revealed.

But Premier League chief Richard Scudamore persuaded them to give Pompey an early parachute payment to allow them to complete the season.

If HMRC's application had been successful it could have led to the club facing a further points penalty before the start of the season, increasing the threat of it facing liquidation.

Mr Mitchell described Portsmouth FC as "a much-loved club with a long, proud history going back to 1898".

"Its existence is threatened because it has for some years spent well beyond its means."

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