by Dirk Gently »
04 Dec 2009 09:28
It's not law of the land, but it's law within the Fl and PL - if a club wants to retain its league status then they have to pay all "football" debts, and then it's the residue after that that goes into any pot for paying out any creditors during administration. Otherwise they'd get thrown out of the league, and so there'd be no point in administration, as a club with no league place isn't worth rescuing.
On the face of it, it looks ludicrous, and does give rise to some absurd situations. When Bradford went bust because they were paying Benito Carbone way too much money, this rule meant that Carbone had to be paid in full, but the local business who made the pies and the local bloke who printed the programmes took a massive hit as they got something like 4p in the pound (as did, irony of ironies at Bradford, the local St John's Ambulance and West Yorkshire Fire & Rescue).
So far so outrageous - and you can understand why HMRC oppose this rule so violently.
But the simple fact is that football runs on inter-club credit, and clubs or players didn't have a guarantee that they'd get their money in full the whole system would break down. Liverpool would refuse to play at Reading (or any smaller club) in the cup because RFC collect the money in and then pay it to Liverpool later and so that' a financial risk to Liverpool, and nearly every transfer is done on credit over 2-3 years. Take away the financial guarantees and the whole financial system in football collapses!
There's no easy answer to this one - but football will fight violently to protect this rule while HMRC violently hate it (and good for them, really - it's taxpayers' money we're talking about here...).
So all power to HMRC and the Football League for the new tax disclosure scheme, brought in this July, which will ensure that FL clubs can't use HMRC as a "free bank" and build up big debts. In the short-term, though, it means that those behind with taxes will need to agree settlements very soon, which is why there'll be lots of FL administrations this season.
(Incidentally, a big raspberry for the CCC clubs who delayed this new scheme for a year over a technicality about agents' fees. A much bigger raspberry to a certain FL chairman who ran a vigorous campaign urging FL clubs not to adopt this scheme - of course, it was everyone's favourite wheeler-dealer, KB of Leeds!)