Southend United Hit The Financial Buffers
It seems as if there’s been an exponential increase in clubs heading for the courts over unpaid tax or VAT bills this season. The answer to the question, “Accrington Stanleee, ‘oo are dey?” was “the League Two club that owe £308,000 to HMRC” until they found salvation the other week. And it feels like every other lower league Scottish club has been up before the tax beak in recent weeks. Judging by the attitudes of some well-indebted clubs, though, you’d think their tax bill was a badge of honour, although some accountants offer a simpler explanation. “Clubs fund working capital by not paying PAYE, NI and VAT. “It’s a way of managing a club’s cash flow“ said one, when it was reported this time last year that Football League clubs owed “£50m in unpaid taxes.” One lower league club owner revealed that his accountants had said: “HMRC were effectively the club’s ‘bank’”.
Southend United have owed hundreds of thousands of pounds to Her Majesty’s Revenue and Customs for quite some time. And, at the time of writing, they still do. Their tax bill, back in the good old days of a couple of weeks ago when it was TWO…THIRDS…OF…A…MILLION…POUNDS, was “no cause for alarm” according to chairman Ron Martin, because “a similar situation arose this time last year, necessitating a payment of £660,000 in July 2008”. Well, outside the mind of Ron Martin, it is a cause for alarm, not least since the tax debt is now a reported TWO…POINT…ONE….THREE…FIVE…MILLION…POUNDS. The Shrimpers are due in court on November 9th to confirm that the money was paid by November 6th. Southend had promised to pay it by then, five minutes before a court hearing on November 4th. This hearing had been delayed a week from HMRC’s original 28th October deadline for the payment of £690,000 – 91 days on from June 12th, when HMRC issued a winding-up petition against the club.
The origins of the tale go back further, of course. The panacea for their ills has for a decade been a move to a new stadium at ‘Fossetts Farm’ in North Southend. Martin, and his property development company Martin Dawn PLC, have been at the forefront of a wearying battle for planning permission, which was a complex matter even before Labour minister John Prescott was asked to voice his opinion in his famously destructive syntax. An accurate assessment of the Shrimpers’ problems might be: “…riddled with debt (some say in the region of £8m)… it was hoped that a new stadium at Fossetts Farm would have meant cash injections would not be required by now… however, Fossetts Farm has dragged on so long”. This was written on the ‘Clubs in Crisis’ website – in 2003.
Yet while Martin has continually punted the “no need for alarm” line – plus many other strange lines in his regular statements to the club’s web-site, from a parallel universe. These seem to have met with a collective “oh, that’s alright then” from Shrimpers’ fans right up until the proverbial last minute, when £690,000 became £2.135m. June 12th, the day of HMRC’s original winding-up petition, was the day the Football League amended their rules to allow clubs certain leeway over tax debts. These rules effectively gave Southend their 91 days to pay. Martin said this was “HMRC’s right hand not knowing what its left hand was doing…its timing could not have been more perverse.” But the real perversity was Martin’s failure to explain why the club were so lax with their tax in the first place.
He also cited HMRC’s “sudden change of attitude to Southend.” It was as if the matter was somehow HMRC’s fault, Martin neglecting to mention that HMRC’s previous “attitude” had failed to get Southend to cough up. By the time the season started, fans’ attention was centred on more team-related affairs. But financial issues began to infiltrate these too. In August popular striker Andy Revell was shipped out on-loan to Swindon “with a view to a permanent move in January”. Revell’s spell at Southend was interrupted by a broken leg and only produced four goals in 28 games. Yet he was valued highly by fans who were outraged by Chief Executive Geoffrey King’s terse comments: “He was signed to deliver. But he hasn’t. That is why he is moving on”. Revell had a different perspective: “I was told I had to leave for financial reasons. People can read into that what they like.” People did. And people read “financial crisis.”
While Southend claimed they were telling Revell he was to be loaned out for matchday experience after his injury, Revell was telling the Southend Echo that he was looking forward to “more appearances” in a Southend shirt. What had Martin said about left and right hands? Then came revelations that former Shrimpers’ stalwart Spencer Prior was awaiting contractually agreed benefit payments from the club, including receipts from his May benefit match, a portion of which was due to a local children’s hospice. Prior told the Echo, “It’s upsetting that I’ve had to speak out…but this is money that is owed and it’s worrying that they haven’t been able to pay it yet.” This also pointed to “financial crisis.” But Martin pointed to “media conspiracy.” He accused the Echo of: “Selected quotes – nearly always out of context – to sell more papers…(they) seem intent on destruction…glorifying everything into bad news…living off the club, while insidiously undermining everything about it…I am told (editor) Martin McNeil is a Colchester fan…” and so on…and on, and he criticised their “low moral tactics” over the hospice. “Suggesting it is the club’s responsibility to pay (them) is outrageous,” he concluded.
However, his outrage manifested itself in the form of a £10,000 cheque to the hospice, an admission of that responsibility which Martin tried to disguise as maintaining the club’s fantastic name for community and charity work”. He labelled Prior’s “duet” with the Echo as “a calamity in misrepresentation.” But Prior was right. The club was contractually obliged to pay him, and they hadn’t – or couldn’t. When asked by Echo journalist Chris Phillips why Prior hadn’t been paid, King replied: “Spencer turned up not even dressed for the match, five minutes before kick-off.” “But that doesn’t explain why he hasn’t been paid,” noted Phillips, correctly.
This forced King to admit that payment was a contractual obligation – contradicting Martin, who claimed the contract had expired and the match only happened “because we are honest, morally correct individuals”. At the club’s AGM in early September, Martin was asked directly whether the funds to pay HMRC were in place, and replied “no” but he was confident that they would be. By the time the payment was due, only the wording had changed. “The building blocks are in place to enable the indebtedness to be met” he said, in another club web-site statement from the outer limits. On October 26th, two days before their deadline, HMRC decided that they’d have a better chance of getting their money by forcing Southend into administration, and this court hearing was set for November 4th.
Rather than view this as an extra week to find the cash, Martin lambasted HMRC’s “Machiavellian” strategy and blamed the banking crisis, stopping only just short of citing the postal strike as well. HMRC’s “hostile” action was “unwelcome and destructive” and “done with deliberate intent to burden the club still further.” Southend’s “lawyers and barristers” said that “the steps taken by HMRC have never been seen before”. What Martin somehow overlooked was that HMRC were now after £2.135m, not £690,000. And with “building blocks” not enough, a consortium of ten local businessmen, reportedly worth £150m between them, offered to buy the club, take on the debt and replace Martin as chairman.
This shot at salvation, which emerged two days before the new hearing, was rejected by Southend’s directors because “such a transaction could not be structured in the time available (and) our information is that the proposed structure would still result in a ten-point deduction” for entering administration. They added “the club (should) be 100% focused on the other alternatives already being pursued.” The “building blocks,” presumably. Five minutes before the delayed High Court hearing, the club said they’d have the money by Friday 6th. HMRC accepted this and the hearing was adjourned until Monday 9th, “by which time it would be known if the sum had been paid in full”.
And so we wait. Martin seems determined to hang on to the club at almost all costs. The “beneficial owners of the Fossett Farm development are me and my family,” he had said, and he isn’t about to give up those benefits, but after months of misinformation or no information at all, fans are left frustrated. And probably by the time you read this, Southend will be in administration, or under new ownership…or Martin will have finally paid the club’s taxes. Whatever the outcome, Southend are yet another example of the financial mismanagement infesting the game, and more clubs will surely have their day in court, sooner rather than later.