Rachael Singh, Accountancy Age, Wednesday 2 June 2010 at 10:12:00

Taxman issues writ against Premier League, aiming a kick at the controversialfootball creditor rule

The taxman is taking the Premier League to court in what is another attack byHM Revenue & Customs against the controversial football creditors rule.

Accountancy Age has learned that HMRC filed a legal writ against thePremier League on 18 May.

Currently if a club enters administration they are bound by the footballcreditors rule, meaning some creditors such as players and managers will be paidin full from the administration and the remaining payments divided between theunsecured creditors including HMRC.

The tax office said that due to the duty of confidentiality it could notcomment on individual cases, but made no secret of its disdain for the footballcreditors rule, labeling it "unlawful".

"HMRC?s view is that there is nothing in insolvency legislation that providesfor unsecured debts due to ?football creditors? to be paid in preference toother unsecured creditors such as HMRC.

"Our view is that the practical application of the so called 'FootballCreditors Rule' may be unlawful. We have nothing further to add at this stage."

In the Portsmouth administration the football creditors are expected toreceive their full repayment of 22.4m funded by the Premier League?s deductionsin the club's allocated TV revenue. However, unsecured creditors who are owed anestimated 83m are expected to be repaid around 16.5m over the lifetime of theCVA - usually five years.

In the CVA proposal document administrators claim that HMRC is taking actionagainst the unfair advantages by football creditors.

"It is understood that a separate action is being initiated by HMRC againstthe football creditors rule, it is therefore not intended that a challenge tothe football creditor rule will be undertaken by the future liquidators of theoriginal company," it said.

The Premier League declined to comment on the details of the legal case.

Further reading:

PortsmouthCVA sees HMRC chase image rights payments

PortsmouthFC heading for groundbreaking deal

Portsmouthadministrators win 4m boost