A Tussle With The Tax Man

A Tussle With The Tax Man

By on Dec 31, 2009 in Finance, Latest | 10 comments

So, the realpolitik of overspending has finally come home to roost in the Premier League with the issuance of a winding up order against Portsmouth. Such action by HMRC is hardly surprising. The authorities long since stopped caring too much about what happens to them, and why should they? Much is made in some circles of football turning from a sport into a business, and the usual rules of business apply. If you can’t pay your bills on time, you are insolvent and your creditors have the right to press for company to be wound up. There has been nothing happening at Fratton Park over the last twelve months or so to indicate that Portsmouth Football Club is anything other than hopelessly insolvent.

Inside the club, the denial continues to linger. Asked about it yesterday, club officials continues to plead ignorance. If papers hadn’t been served upon them, it was because more likely than not that this is merely because of the Christmas break. It is the court that serves the papers rather than the creditor, and it is likely that the court service will not be operating at full strength over the Christmas and New Year period. A date for a hearing will now be set – about six weeks is considered normal – and Portsmouth Football Club now has to decide how it wishes to proceed.

It is at this point that alarm bells start to go off. Portsmouth have, in reality, three choices ahead of the February deadline. Firstly, they could raise the money that they need to in order to pay off the petition amount. They have an opportunity to do this because of the January transfer window, but such a move would almost certainly condemn them to relegation from the Premier League and, even if it didn’t, they still wouldn’t receive anything like the full value for players that they could theoretically sell next month. Secondly, they could enter into administration. Such a move would have a similarly severe affect on the likelihood of their staying in the Premier League – a nine point deduction would cut them off at the bottom of the table than they already are. It would, however, secure their future in the short term.

The third option, however, seems to be the one that they are going for, and it is the highest risk strategy of the three. Reports elsewhere in the press seem to be that they are intending to dispute the debt. They need to have a watertight case if they are to win. The clubs claims to only owe two months’ worth of PAYE, National Insurance and VAT, but this is obviously a sizeable amount of money. The club claims to have paid off £5.7m of £9.7m outstanding, but Portsmouth supporters will be wondering what the grounds are for believing anything that comes out of Fratton Park at the moment. To dispute the existence of the debt and make that the basis of fighting a court case is often regarded as a stalling tactic, creating confusion where there should be none in an attempt to set aside judgement. HMRC, however, are prevented by law from issuing proceedings as a scare tactic alone, and it seems unlikely that they would begin what would obviously be a very high profile case without having first checked that their case was watertight.

Avram Grant, interviewed last night as his team was humbled 4-1 at home by Arsenal, seems to be in a similar state of denial. “Everybody knows we need to make the team stronger. No-one has said we need to sell players. All the players need to stay and the board knows it”. That may well be his opinion, but the bare fact of the matter seems to be that the old adage about no news being good news doesn’t necessarily apply to Portsmouth at the moment, and it has even been suggested that HMRC have timed their petition deliberately precisely because they know that the transfer window is imminent. Portsmouth supporters already know fully well that player sales have been used by the club to pay off debts – Peter Crouch went to Tottenham Hotspur for £10m during the summer, money that has already been thrown onto the bonfire of the club’s mismanagement – and it seems unlikely that, even with a transfer embargo still in place, more will not follow.

The biggest concern for Portsmouth at present, however, is their long term survival. How on earth will the club cope if (or when) it is relegated from the Premier League at the end of this season? Do they have adequate plans to offload their highest earning players? Because if they have been struggling to pay them this season (and there seems to be fairly cast iron proof that they have), they’re going to find it impossible without the comparative windfall of Premier League television, sponsorship and prize money. They may well end up winning their tussle with HMRC, but even a victory in court in February is unlikely to mean an end to their current tribulations.

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    10 Comments

  1. The way this has been reported is terrible.

    Who on earth are this HM FC to challenge the might of the Premier League and its army of lawyers etc.?

    Harry Redknapp belongs in prison.

    Martin

    December 31, 2009

  2. Methinks the first respondent be off his face – understandable, [perhaps?] – given time of year. The thing I marvel at is the accuracy of reporting herein. Who are HM FC? – proof positive of respondent’s bedraggled state. Harry has nought to do with Portsmouth’s problems – remember, he moved on ages ago!

    Harry & Hodgson [of Fulham] are, to my way of thinking, the best ENGLISH Managers about.

    Harry has ALWAYS done well & will continue to do so!

    Happy New Year, HARRY!

    Mike Roche

    January 1, 2010

  3. That is a serious “whoosh” there Mike :)

    Every single one of Harry’s previous clubs has been or is still in serious financial difficulty.

    Are you saying that this is merely a huge co-incidence?

    Martin

    January 1, 2010

  4. Martin, you would need agree, Harry gets RESULTS. It’s the folk holding the purse who have the final say & they must have thought they could afford to do what was done.

    Harry’s current Club have historically been better money managers. Time ought prove Harry has been good for them & delivered.

    There’s always a risk in business of over extending – particularly in Football – adrenalin all the way!

    Mike Roche

    January 3, 2010

  5. The HMRC and criminal tax avoidance investigation into Storrie and Redknapp at Portsmouth should reveal a lot about who controls the purse-strings when Harry is in town…

    Martin

    January 3, 2010

  6. Oh! To be so powerful!

    Mike Roche

    January 4, 2010

  7. The HMRC and criminal tax avoidance investigation into Storrie and Redknapp at Portsmouth should reveal a lot about who controls the purse-strings when Harry is in town…
    ………………………………………………..

    Do you think that the owners of a club give the manager the right to spend whatever money he wants on whoever he wants? The manager makes requests and they are approved or denied by people higher up. To suggest that Harry is at fault for Portsmouth’s money crisis is to suggest that the people who run Portsmouth are jibbering fools who simply say yes to any requests.

    That may be true.

    You should vent your rage at them maybe?

    John A

    January 4, 2010

  8. That doesn’t include me of course! Spurs & Fulham are my pick of clubs managed best on field by locals – Add Mr Burnley/Bolton to the list too, though he be from a touch further afield!

    Mike Roche

    January 5, 2010

  9. Portsmouth’s great demise is symptomatic of the Premiership as a whole, overspending like it’s going out of fashion, over-inflated wages to go with the ego’s with only a very few clubs getting a fair share of any TV monies!
    It was only a matter of time before things started to implode and it seems Pompey may very well not be the only other club to suffer financial disaster, you only have to look at the operating debts which is staggering!
    Perhaps all of this can be interpreted as a “wake-up” call to all concerned, including the lower leagues. Common sense together with sound financial house-keeping needs to prevail and the concept of Never,Never Land needs to fly out of the window!
    Football in this country used to embody the spirit of the community, not the greed of the few. The wealth of the game should be filtered down to the lower leagues not just the Premiership and Championship, also the cost of going to games should be lowered to assist the many on low incomes, not all are on Lottery style wages!
    Football is our national sport, but if we’re not careful many clubs from the top down will disappeare and thats no good for anyone. I just hope it’s not too late!

    SaintChip

    January 10, 2010

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