As we have reported over the last few months, Revenue and Customs has been getting increasingly exasperated with the view of many football clubs that meeting their PAYE and other tax obligations is an optional extra. When clubs go bust, they have been particularly annoyed by the ‘football first’ rule which means that failing football clubs settle ‘football debts’ ahead of all others.
As we have reported over the last few months, Revenue and Customs has been getting increasingly exasperated with the view of many football clubs that meeting their PAYE and other tax obligations is an optional extra. When clubs go bust, they have been particularly annoyed by the ‘football first’ rule which means that failing football clubs settle ‘football debts’ ahead of all others.
At a time when there is pressure on public finances, Revenue and Customs has had enough and they have issued a writ against the Premier League in an attempt to overturn the rule which they say is ‘unlawful and against public policy’. Given that the Football Association and the Football League use the same rule, a successful challenge would affect them.
The Revenue’s view is that ‘Non-football creditors are being seriously short changed and enough is enough.’ There was nothing in insolvency legislation that allowed unsecured debts due to football creditors to be honoured to the detriment of other unsecured creditors. The Premier League has said that it intends to robustly defend its position.
There is a previous Court ruling which upheld the rule. In 2004 the Inland Revenue failed in a court action to overturn a voluntary arrangement of Wimbledon Football Club on the grounds it infringed the Insolvency Act as football creditors received payment in full while the Revenue, a preferred creditor, did not. The High Court ruled that the power of the League to secure payment for football creditors might be seen as ‘objectionable’ but was legal. If the Revenue pursued payment in full of priority debts the whole edifice of football would be brought down and no one would get anything.
Clearly, the Revenue thinks it is worth trying again, given the increasing sums at stake and the need to reduce the budget deficit. The ‘world of football’ often thinks it is outside the rules that apply elsewhere, but as the game has become more like a business, it has increasingly subjected itself to those rules.
One instance of this was the Bosman case which showed that football was not exempt from European law on free movement of labour and significantly altered the player transfer market, as we shall show in our forthcoming book on European rule. Subsequently, football ran foul of EU competition law and had to negotiate special arrangements which included the much criticised transfer window. The Lisbon Treaty has a clause that recognises the special character of sport, but that is unlikely to give protection against actions of this kind, although the outcome of this case is genuinely uncertain.