HMRC issue writ to Premier League
Thu 3rd Jun 2010 | Legal
The taxman is taking the Premier League to court in what is another attack by HM Revenue & Customs against the controversial football creditors rule.
Accountancy Age has reported that HMRC filed a legal writ against the Premier League on 18 May
Currently if a club enters administration they are bound by the football creditors rule, meaning some creditors such as players and managers will be paid in full from the administration and the remaining payments divided between the unsecured creditors including HMRC.
The tax office said that due to the duty of confidentiality it could not comment on individual cases, but made no secret of its disdain for the football creditors rule, labeling it "unlawful".
"HMRC‘s view is that there is nothing in insolvency legislation that provides for unsecured debts due to “football creditors” to be paid in preference to other unsecured creditors such as HMRC.
"Our view is that the practical application of the so called 'Football Creditors Rule' may be unlawful. We have nothing further to add at this stage."
In the Portsmouth administration the football creditors are expected to receive their full repayment of £22.4m funded by the Premier League’s deductions in the club's allocated TV revenue. However, unsecured creditors who are owed an estimated £83m are expected to be repaid around £16.5m over the lifetime of the CVA - usually five years.
In the CVA proposal document administrators claim that HMRC is taking action against the unfair advantages by football creditors.
"It is understood that a separate action is being initiated by HMRC against the football creditors rule, it is therefore not intended that a challenge to the football creditor rule will be undertaken by the future liquidators of the original company," it said.
The Premier League declined to comment on the details of the legal case.
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