Page last updated at 00:36 GMT, Sunday, 23 November 2008

Football clubs owe tax millions

By Paul Grant
The Donal MacIntyre Programme, BBC Radio 5 Live

Football finance graphic
The study involved 18 of the 42 clubs that have gone into administration

More than 28m of tax money owed by struggling football clubs in English divisions has been written off by HM Revenue and Customs, the BBC has found.

The debt was incurred by 18 clubs which have gone into administration with unpaid tax bills in recent seasons.

In one case, Leicester City settled just 10% of their 7m tax bill.

Under league rules, clubs pay football-related debts such as salaries and player transfers first, but HMRC believes this is unfair.

The Football League says it will consider stricter financial controls, including asking all clubs to provide it with more information about their accounts.

Since 2000, 42 professional clubs in the Football League and the lower divisions such as the Football Conference have gone into administration - some more than once. The BBC examined the tax debt in 18 cases.

In total, the 18 clubs owed approximately 31.7m to the taxman, but paid back only 3.5m - meaning the public purse lost out to the tune of more than 28m.

That figure would be higher if all the other clubs that have gone into administration had been included in the BBC study.

'Taxman not a priority'

When a football club goes into administration, the "football creditors rule" requires all football-related debts - to players, coaching staff and other clubs - to be paid first and normally in full.

HMRC is not deemed a preferential creditor and has to line up with other non-football creditors to share what is left in the pot. That means the taxman is typically paid 5-10% of what is actually owed.

HOW TO LISTEN...
The Donal MacIntyre programme is on Radio 5 Live on Sunday, 23 November at 1900 BST.

Finance regulations set by the Football Association and the Football League means professional football clubs have a unique way of dealing with debts.

The debt to HMRC is often substantial because large player salaries mean big income tax and national insurance bills.

When Luton Town went into administration in 2007 it owed 2.5m to the taxman, but paid back just 275,000. Leicester City owed 7m but paid 700,000, and Ipswich Town had unpaid tax debts of 5m in 2003, but reached a settlement of 391,000.

Leeds United went into administration in 2007 owing nearly 7m to the taxman. The Revenue and other creditors were initially offered just a penny in the pound - in contrast to former players, who were paid hundreds of thousands of pounds each to honour their contracts.

HMRC challenged the offer, but are still likely to get only 10p in the pound - meaning it will have to write off more than 6m of public money.

Rule changes needed

Phil Willis, the MP for Harrogate and Knaresborough and a strong critic of the Leeds deal, says clubs should not be allowed to write off such huge tax debts.

He said: "It is quite ludicrous that the taxpayer has to pick up the tab for what are often poor business dealings.

"We should get rid of the football creditors rule and all creditors should get an equal share of the money, as happens when other businesses go into administration."

Lord Brian Mawhinney
We are looking at regulations which will try to prevent clubs getting into this situation
Lord Mawhinney
Football League chairman
The Football League say the football creditors rule is necessary to prevent clubs gaining an unfair advantage over their rivals by not paying for player transfers.

However, it is now looking at ways of preventing clubs running up huge tax debts in the first place.

Football League chairman Lord Mawhinney said the league was considering a plan for clubs to provide more financial information.

"Trying to ensure debt to the Revenue is manageable is clearly an issue... and we are looking at regulations which will try to prevent clubs getting into this situation. Prevention is better than cure," he said.

HMRC now routinely opposes any deals offered by football clubs in administration - a move seen by many within football as one designed to put pressure on the FA and Football League to change its creditors rule.

HMRC is so opposed to the rule that, when the new owners of Luton Town Football Club offered to pay a 2.5m tax debt in full in order to come out of administration, the Revenue refused.

'50-60 clubs in arrears'

Luton Town managing director Gary Sweet told the BBC: "It's politics, it's the Treasury versus football. If we were another business I think the deal we were talking about with HMRC would have been accepted."

HMRC told the BBC: "Football clubs and other employers are well aware of their responsibility to pay over any tax and National Insurance deducted from their employees' pay-packets. "

Last week, a well-placed industry source with a detailed knowledge of the tax affairs of football clubs told the BBC there were 50 to 60 clubs in either the Football League or the Football Conference currently in arrears to HMRC.

He said his conservative estimate was that football's current unpaid tax bill was at least 50m.

The Donal MacIntyre programme will be broadcast on BBC Radio 5 live at 1900 BST on Sunday 23 November, 2008 or you can download the programme podcast

FOOTBALL CLUBS IN DEBT

League Tax owed Amount club is to repay Deficit
Leicester City League One 7m 700k 6.3m
Leeds United League One 6.8m 680k 6.1m
Ipswich Town Championship 5m 391k 4.6m
Bradford City League Two 2.6m 26k 2.58m
Luton League Two 2.5m 275k 2.2m
Wrexham Blue Square Prem. 1.45m 507k 943k
Bournemouth League Two 1m 100k 900k
Halifax Town Unibond Division One North 795k 0 795k
Huddersfield League One 723k 101k 622k
Cambridge U Blue Square Prem. 532K 101k 431k
Oldham League One 520k 260k 260k
Notts County League Two 487k 96k 391k
Wimbledon (now MK Dons) League One 460k 0 460k
Rotherham League Two 450k 20k 430k
Exeter City League Two 442k 62k 380k
Darlington League Two 416k 2k 414k
Lincoln City League Two 350k 143k 207k
Crawley Town Blue Square Prem. 193k 96K 97k



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SEE ALSO
Football clubs face tax scrutiny
11 Nov 08 |  Business
Football finances in detail
28 May 08 |  Business

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