Date 31 March 2011
As the High Court prepares to hear HMRC’s challenge against the Football League’s financial rules and a Parliamentary Select committee continues to take evidence on the ownership and governance of English and Welsh football clubs, a Freedom of Information Act inquiry (FOI) by renowned website “sportingintelligence” has revealed that one year on from the debacle of a Premier League club (Portsmouth) entering administration, it has been revealed that clubs from the Premier League continue to owe millions of pounds in tax payments, including VAT, despite being rich enough to pay players' salaries that in some cases run into six figures per week.
The amount due alters regularly throughout the year but a snapshot for a period in 2010 showed that more than £22m in ‘simple‘ taxes (PAYE, National Insurance and VAT) were unpaid to HMRC by the 92 clubs in the Premier and Football Leagues. The Premier League’s 20 clubs collectively owed £8.6m in VAT alone. Championship clubs owed £6.4m, and the 72 clubs of the Football League collectively owed £7.4m.
As ‘simple’ tax debts, for April (just after the tax year had ended) these amounts have been described as probably the ‘low ebb’ snapshot of 2010. Another snapshot in summer 2010 suggested the amount of unpaid tax had increased.
The Premier League reportedly responded that it had introduced a raft of financial criteria to encourage clubs to run themselves in a responsible and sustainable manner, including “quarterly reporting on any overdue HMRC payments and the ability to intervene if clubs get behind”. A spokesman was reported to say that “When combined with HMRC’s new policy of, quite rightly, not permitting clubs to run up debts over time, this will more than mitigate this issue going forward.”
The state of the 2010 debts is revealed as the Premier League prepares for a legal battle with HMRC over the validity of the so-called ‘Football Creditors Rule’ ("the Rule”). The effect of the Rule is that following a formal insolvency of a club, unlike other unsecured creditors (such as HMRC), ‘football creditors’ such as other clubs and players get paid in full.
HMRC’s challenge against the Rule is due to be heard shortly by the High Court. Whoever wins (including any appeals) the result looks set to dominate the financial governance of football clubs for years to come.
If you would like more information or advice relating to a specific matter, please do not hesitate to contact Robert Ryall on 01727 798000 or any member of the Commercial Dispute Resolution team.
© SA LAW 2011
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