A Tussle With The Tax Man
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.