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Portsmouth FC to learn fate on Thursday

Wed 4th Aug 2010 | Legal

Portsmouth Football Club are expected to find out on Thursday whether an appeal by HMRC which disputes the amount of money they are owed has been successful.

HM Revenue & Customs claims it is owed £13m more than the £24m claimed by Portsmouth's administrators. If HMRC are successful in their appeal, Portsmouth could face a further league points penalty and the very real threat of liquidation.

At the club’s High Court hearing on Tuesday, Gregory Mitchell QC representing HMRC said that the club were operating a "sham" to avoid paying more tax.

It’s understood that he has accused the club of paying players via image rights instead of salaries, meaning they would not have to pay tax on their earnings as they could be deposited in offshore accounts.

"[Pay-as-you-earn tax] should have been paid," Mitchell said. "For some years the club has entered into sham agreements under which players were being paid in respect of image rights when in fact there was no commercial basis for it.

"It was a way in which the club could pay the money into a tax haven."

Former player Sol Campbell is said to be owed over £1m in unpaid image rights by the club.

A Company Voluntary Agreement (CVA) which would allow Portsmouth to exit administration had been agreed. on 17th  June when the proposed agreement garnered 81.3% of the vote. However, HMRC claims it is owed a total of £37m and is challenging this.

HMRC are arguing that the disputed £13m of debt which was left out of the original calculations and, if included would give the taxman more than the 25% of the debt it needs to block the CVA.

As one of the non-football creditors HMRC as such would receive only a percentage of what it is owed under the CVA, although if Portsmouth are liquidated HMRC could actually lose more money.

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