Southend United’s Counter-Attack Against HMRC
When HMRC came a-calling for Southend United’s tax debt, the club decided that it didn’t the money in the first place. Or did it? Mark Murphy finds mixed messages coming from Roots Hall, and supporters of the club are now very concerned about its long-term well-being.
Southend United were very much on the undercard when representatives of domestic football’s top-three tiers rocked up at the High Court this week to be given varying stays of execution. It was too easy to note instead that 2008’s FA Cup finalists were in town and draw the handily alliterative “Wembley to Winding-up” timelines (almost nobody, sadly, asked “who the hell are Hinckley?”). But Southend’s issues were depressingly similar as was the mindset which brought them to this place. Indeed, Southend’s chairman – and the perceived bogeyman in their tale – Ron Martin was quite open about what has been termed football clubs’ “using HMRC as a bank.” Certainly more open than Portsmouth, who have accusations of “cheating the public revenue” hanging over employees past and present (Hello Harry, hello Peter!), as well as absolutely everything else.
In a series of “chairman’s blogs” on Southend’s website, which Fidel Castro might have cast aside as “a bit long-winded”, Martin referred to the “inadvertent use of HMRC Bank plc” and noted, correctly, that “this may not have been well received in all quarters.” However, despite this moment of clarity, Martin still claims not to understand HMRC’s less-than-charitable-attitude towards the club. Is he really that dim? Or is there something else going on? Southend, you may recall, “paid” (i.e. agreed a repayment schedule for) £2.15m in back taxes at the very last minute three months ago. The money came from one of Martin’s own “group” companies, “Roots Hall Ltd”, money which, Martin admitted, “was part of a much larger picture to construct the stadium.” In other words, it appeared, Martin had borrowed future stadium expenditure.
The amount HMRC were pursuing had leapt three-fold only a few metaphorical minutes previously, but the club were leaving things late regardless of the final figure. And a few metaphorical minutes later, there were rumblings that HMRC might have got their hastily re-arranged sums wrong to the tune of £200,000. So Southend, whose previous knowledge of taxes hadn’t even stretched to paying them on time, decided that the country’s ultimate tax authority were wrong, and decided not to pay the disputed amount. Ergo another winding-up petition, the necessity of which the club and HMRC have contrasting views on.
Chairman Martin’s blogs had tried to couch the club’s tax situation “in simple terms” and, predictably, failed. His 20th November blog on the club’s web-site was entitled “From the Chair” but for much of the time Martin appeared to be speaking “through the chair.” He noted that some supporters (“not many in truth”) had “commented that I have ‘gone quiet’”, which wasn’t necessarily a complaint, and added that supporters expected him “to add clarity to recent events, as you always do’”, which wasn’t necessarily without irony. Indeed, one month and two blogs later, he noted that the club’s “media department had picked up on an e-mail” – i.e. they’d read the local Echo newspaper – from a supporter who said he’d not understood Martin’s clarifications. This itself was quite understandable, as we’ll soon see. Slightly sinisterly, Martin noted that “the name given was not on our database,” possibly an attempt to suggest the person was the product of the imagination of the club’s “detractors”. “It is only the media,” Martin noted drearily, a few paragraphs later, “that make more of (these matters) than is necessary, causing untold grief to everybody who cares about the club.” Some people were being “judgmental…i.e. in some way guilty until proven innocent.” He then asked: “guilty of what – paying a tax bill late?”. Well… yes.
Martin had his indignant hat on again by the time HMRC issued Southend with another winding-up order, as a Christmas present of sorts, on December 23rd. “So that supporters fully understand”, the club published their solicitor’s letter (no irony, there) to HMRC concerning what the solicitors termed a “misallocation” of tax “of £205,333.83, which claimed that there “are no arrears of PAYE and NIC for months seven and eight”. “Indeed there is a credit,” they continued, a little unexpectedly, “of £5,994.83”, which the website article translated as “The club believe they have overpaid PAYE by over £200,000.” So the club took it upon themselves to “offset this amount against sums that would become due on 19th November and late December (months seven and eight, respectively). HMRC were advised of this intention.”
The difference between “misallocation” and “overpayment” was not made clear, nor was the significance of “months seven and eight.” And the letter continued with unclarified references to “trite law” – unintentionally emphasising how late Southend had been with their taxes when it noted: “The fact that HMRC may not have received our clients’ payment until 21st July 2008 (!) has nothing whatsoever to do with the agreed allocation.” Whether supporters now “fully” understood or not, the “dispute” over the tax due seemed to be as much about “when” as “if.” Tax deducted monthly as and when due, Southend seemed to be arguing, should be paid back “as and when due.”
But HMRC, firmly of the belief that “as and when due” equalled “now”, issued another winding-up petition to get back the money Southend unilaterally decided not to pay in November and December, seemingly of the view that “advising” HMRC of “this intention” made it all OK. Martin went on the counter-attack in a statement appended to the article, carefully choosing certain words to place Southend in the role of victim. He accused HMRC of issuing winding-up petitions “like confetti,” stretching the unfunny wedding analogy to “(HMRC’s) relationship is not, in some quarters, a marriage made in heaven.” And he added that “the club may, bizarrely, now need to apply to the court for an injunction against HMRC.”
With their High Court hearing set for what Sky Sports might have termed “Wonderful Wednesday”, Southend this week railed against “the further, we believe, wholly un-necessary action by HMRC.” And the solicitors, London firm Dechert, piled in with “we are frankly astounded that you have proceeded with…a winding-up petition,” claiming “it is an abuse of process for any creditor to use the winding-up procedure in relation to a disputed debt.”
Confusing? Certainly. Especially as the “winding-up procedure” was being used against Portsmouth over “disputed” debts. But the point remained that whether the figure was a whopping £2.15m or an almost-as-whopping £1.95m, Southend had been very late paying very substantial amounts of tax. In November, Martin said: “The taxman’s efforts to unglue all that is good about our wonderful football club was (sic) beyond the pale.” Tugging at the heartstrings, he referenced “the outstanding contribution the Club makes to the community, social inclusion, charities, civic pride and the children of the Town.” That such nobility didn’t extend to a “contribution” to their tax arrears was overlooked.
“Do not tell me,” Martin continued, “this would not have unravelled if HMRC had “won,” accusing them of having “no regard for the screamingly obvious commercial position that would facilitate payment, or the delays and circumstances of which (sic) they were directly or indirectly responsible.” This was a reference to the slow pace of governmental approval for Southend’s new stadium at Fossett Farm, the panacea for all the club’s financial ills. That Southend owed tax on taxable income they’d actually received was also overlooked. So it is that Southend have 28 days to sort things out once and for all with an indignant HMRC. Between HMRC’s winding-up petition and Wednesday’s hearing, Southend sold striker Lee Barnard to Southampton for an undisclosed fee.
This was money which hadn’t been available on “19th November and late December (months seven and eight respectively)” and which would have been handy, if Southend had needed it then for any specific reason. By the way. “I know where I am taking this club,” Martin said in conclusion to one of his blogs. “And I won’t be distracted by the detractors.” That, ever-increasing numbers of Southend fans believe, is the problem.