Portsmouth to learn fate at High Court on Thursday
By Dan Roan
BBC sports news correspondent
Portsmouth could face a points deduction if they lose the appeal
Portsmouth will find out on Thursday whether an appeal by tax authorities which disputes the amount of money they are owed has been successful.
HM Revenue & Customs says it is owed £13m more than the £24m claimed by Portsmouth's administrators.
Pompey, who were relegated to the Championship in May, are striving to come out of administration.
If the appeal succeeds, Pompey could face a further points penalty and the threat of liquidation.
Gregory Mitchell QC representing HMRC told the High Court on Tuesday that the club were operating a "sham" to avoid paying more tax.
He 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."
HMRC claims it is owed a total of £37m and is challenging a Company Voluntary Agreement (CVA) which would allow Portsmouth to exit administration.
For a CVA to be agreed, it must win the support of those owed at least 75% of the unsecured debt. On 17 June the proposed agreement garnered 81.3% of the vote.
But HMRC has argued that the disputed £13m of debt was left out of the original calculations and, if included, it would then have more than the 25% of the debt it needs to block the CVA.
It has come down hard on Pompey as it seeks to dispute the situation where football creditors, such as clubs and players, are given preference and up to 100% of monies owed while other creditors only receive a fraction of what they are due.
If it wins the case, HMRC could lose the £6m offered under the CVA, with Richard Sheldon QC representing Portsmouth saying: "We see no reason why HMRC want to pursue this appeal. They'd be shooting themselves, other creditors and the fans in the foot. I ask them to go away and consider whether they want to pursue this."
If High Court judge Mr Justice Mann finds in favour of HMRC and Portsmouth exit administration without agreeing a CVA, they could be docked 15-20 points by the Football League.
The administrators may then believe they have no option but to liquidate the club.
In February debt-ridden Portsmouth became the first Premier League club to enter administration. They were docked nine points.
Administrators later revealed Pompey owed about £120m and a plan was proposed in June to repay unsecured creditors at least 20p in the pound over five years.
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