The on-going rift between Professional Soccer and HMRC

For those of us who follow the politics of football, will have found the last few days and weeks very interesting. The rift between professional football both here and in Scotland with HMR is glaringly obvious. Messrs Redknapp, Storey and Mandaric have all been exonerated from criminal prosecution of tax fraud from events going back several years during their period together at Portsmouth. It does beggar belief that over £8 million has allegedly been spent on prosecuting a case which on the face of it had all the appearances of a genuine "civil dispute". However, the Redknapp case became very much a show trial and demonstrated that HMRC clearly do not like the way football at the highest level runs itself. Clearly lessons need to be learned and there can be no doubt that all chief executives and finance directors at professional football clubs will want to ensure they have all of their tackle in order. In the last couple of days we have seen two well-known clubs be forced into administration. Portsmouth entered into administration for the second time in two years. It looks like they have had problems paying the tax man. More glaringly however is the potential demise of Glasgow Rangers-a powerhouse not only in Scottish football but in Europe given their annual participation in the Champions League. Different messages are coming out but it looks like HMRC have flexed their muscles. There is talk of a potential liability of £75 million to HMRC in relation to liabilities arising from Employment Benefit Trusts (EPT's) with another £9 million of outstanding PAYE accumulated in the last 12 months and during the period of Craig Whyte’s ownership. Yesterday, was high drama in the Scottish courts with HMRC threatening to appoint their own Administrators if the club themselves had chosen not to enter into administration. The true level of debt will no doubt surface in the next few weeks but it looks as if "the bubble is starting to burst" and the worry is that many other clubs in the Britain could be teetering on financial survival. In the past HMRC took a fairly relaxed approach towards football clubs. They may have come under pressure from MP’s ‘to go easy’ and to ensure that the fabric of the community was not destroyed. However, given the economic climate and times of austerity the Treasury are under pressure to collect as much tax as possible. This is not the end of the on-going battle because we are shortly to receive a decision from Mr Justice David Richards on the status of the "football creditor rule" which has irked HMRC for several years. The one lesson that all football clubs can learn is that HMRC will do no favours. Winding up petitions will be issued like confetti if the trend of using HMRC as a ‘second bank’ continues. It looks like a reality check is coming the way of professional soccer in this country. The likely outcome is that there will be a suppression of wages (some may say long overdue) and with the UEFA financial Fair Play Rules starting to bite we are in for a new dawn of financial prudence.

Published February 15, 2012

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