HMRC FC 1 v 0 Football Creditors FC
Date:
7 February 2019
Anyone who enjoys a football insolvency (including, but not limited to, rival fans) will be aware that the treatment of HMRC in football CVAs has long been a bone of contention. Football CVA proposals generally found a way to ensure that debts owed to football-related creditors were paid in full, while other ordinary creditors (such as HMRC) would end up receiving only a proportion of their debt under the CVA proposal.
Most of the various football governing bodies had arranged their rules (as they were perfectly entitled to do) to try to ensure that if a member became insolvent, the other members (and related parties) would not be disadvantaged. This became known as the Football Creditor Rule and was intended to ensure a level playing field for football; it being suggested that if a football club isn’t paying its debts and goes bust, it has probably used the cash to get a better team on the park and has thus gained an advantage over its opponents. By making sure that football debts are paid in full, the associations tried to ensure that the prejudice suffered by those opponents is minimised.
There is probably some logic in that but it seems fairly obvious that if you entice top quality players by offering large transfer fees and salaries and finance that by not paying your taxes, laundry bills, pie suppliers and programme printers (i.e. your non-football creditors) rather than by not paying those transfer fees and salaries, you still get an advantage on the pitch.
In a number of high profile cases, HMRC challenged those CVAs, claiming that the Football Creditor Rule was contrary to public policy in insolvency law. Invariably HMRC lost those cases and that left it with a bitter taste in its mouth and a hole in its finances where the tax receipts from these football debtors should have been.
Things are about to change and the football governing bodies are about to realise what the word "governing" really means, because HMRC have been gifted a brand new signing and we have been gifted a perfect opportunity to mix metaphors and use football puns in a way that will make the reader sick as a parrot.
HMRC have snapped up a sensational signing in the shape of Crown Preference. Mr Preference last played in the UK in 2003 but has been persuaded to come out of retirement with effect from April 2020 to help his old club overcome their perennial nemesis, CVA Club FC.
From that date, any arrears of taxes collected on behalf of HMRC (e.g. VAT and payroll taxes) by a company will be afforded a preference in that company's insolvency. That means that those arrears will rank ahead of ordinary debts in the insolvency.
