Football Creditors rule lawful says Judge

At a hearing in the High Court today (May 25), Mr Justice David Richards dismissed the latest attempt by HM Revenue and Customs (HMRC) to have the so-called 'Football Creditors` rule declared unlawful.

This decision follows a five day hearing in November and December 2011. Costs have been ordered against the HMRC, who have been granted leave to appeal to the Court of Appeal.

A Football League statement reads "The judgment confirms that The Football League`s rules and insolvency policy do not breach the principles of existing insolvency law.

"We recognise that some regard the application of these rules as being imperfect. However, they remain an essential part of football`s approach to handling insolvent clubs within the wider context of competitive league football.

"The judgment recognises that a league has the right to insist upon insolvent clubs meeting their financial obligations to the rest of the game as a condition of continued membership.

"Had this principle been ruled unlawful, the most likely consequence would be insolvent clubs being expelled from The Football League altogether, as clubs would be unwilling to compete against teams that have defaulted on debts to their fellow clubs. This would have devastating consequences for the clubs concerned, their supporters and people living in their local community.

"Although it is regrettable that HMRC sought to test this matter before the Courts, we remain committed to a constructive dialogue with the tax authorities, as we share the common aim of ensuring that clubs meet their liabilities as and when they fall due, including sums owed to HMRC. To this end, The Football League and HMRC have co-operated over the implementation of a monthly PAYE reporting mechanism that has significantly reduced the amount of tax owed by clubs. (Something I had pressed for - Ed)

"In an ideal world The Football League would never have to apply its insolvency policy. Therefore, our focus will remain on creating a sustainable business environment for all our member clubs. Most recently, this has seen all three divisions of The Football League agreeing to implement cost control measures as part of The League`s Financial Fair Play framework."

While this is good news for football in general, Pompey Administrator Trevor Birch was hoping this rule would be scrapped as it would have helped the club in their current plight. The decision has been very slow in coming forward - six months - which suggests the judge had a lot to consider and that may lead to the appeal being successful - however that would come too late to help Pompey.

Assuming the club proposes a CVA to exit administration (as required by the League rules) the club is suspended from the league until certain 'football creditors' are paid in full through the CVA. This includes transfer fees and players wages. Any remaining monies are paid to the other creditors such as HMRC and trade creditors. Funnily enough, HMRC is not particularly happy that wealthy footballers receive all their money whereas the tax payer loses out.

Of course this is all costing YOU the taxpayer money.

Well that`s it from me as acting Ed as Rug is back from leave tomorrow. See you very soon with a summer series of Toast with my old friend Al Fresco.

PUP

Click here to join in the debate on the club forum.