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Crunch season looms for football debtors

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16th Aug 2012
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With the new season about to kick off, Alex Miller looks at the financial issues affecting the game and assesses which clubs are best placed to stay competitive in the long term.

Football has been eclipsed by the Olympics this summer, but as another season gets under way, there are still as many reasons to watch events unfold off the pitch as financial continue to affect the sport.

Portsmouth FC has dominated headlines this week, for all the wrong reasons. The club narrowly avoided going into liquidation before the season started after all their senior players finally agreed to leave the club.

Administrator Trevor Birch from PKF set a deadline for every senior player to be off the wage bill; failing that he would have closed Pompey down.

Portsmouth will start this season in the npower League One with a 10-point deduction due to the club’s latest spell in administration. Hopes now rest with a £1.45m takeover bid from the Pompey Supporters' Trust after former owner Balu Chainrai dramatically withdrew his bid to buy the club on Monday.

Other clubs in financial jeopardy include Darlington, Stockport and Kettering - these are the clubs most likely to fall foul of tax related-debts and are desperate to avoid following the likes of Chester, Gretna, Rushden & Diamonds and Halifax in folding.

Newcastle United became the latest top-flight side to settle its HMRC-related disputes earlier this year. The club agreed to settle all outstanding disputes with the taxman, mostly relating to the payment of image rights to its footballers. Chelsea also released information in its annual accounts revealing that it paid £6.4m to HMRC following a dispute over image rights payments to players, on which the tax department argued PAYE and national insurance were legally due.

Premiership clubs in general have improved their financial positions after reaching agreements covering past liabilities and future treatment of payments - or embarking in conversations with HMRC to find solutions.

An HMRC spokesman said: “The debt of Premiership clubs has cleared, but there are still some clubs within the Football League that still have relatively large tax-related debts.

“At this time of year, as the season starts, the situation is generally good as clubs have recently received TV money and any transfer fees - but as the season progresses the situation tends to get worse”.

North of the border, the drama looks set to continue in Glasgow with Rangers FC. Now in the fourth tier of Scottish football, the club still has a tribunal case with HMRC over employment benefit trusts (EBTs) to contend with.

In 2010, HMRC issued Rangers with a bill for £35m in unpaid tax and interest, and £14m in penalties, which Rangers challenged at the Court of Session in Edinburgh. HMRC claimed the EBT set up by was in fact a contractual arrangement on which tax was due. A verdict is expected during the course of the season.

With Uefa's Financial Fair Play (FFP) coming into effect this season, clubs taking part in European competitions will not be allowed to spend more than they make. Clubs including Arsenal, Liverpool and Aston Villa have been adjusting their business models to adhere to the rules. For these clubs and others, prudent financial husbandry is the order of the day.

But clubs owned by wealthy benefactors, particularly European champions Chelsea and Premiership winners Manchester City, have been less inclined to rein in their spending. As a result, a collision between wealthy clubs and Uefa seems inevitable in the future.

In a bid to pay off part of its substantial debts and keep up with the big-spenders, Manchester United recently part-listed on the New York Stock Exchange and managed to raise £150m.

However it appears that clubs such as Arsenal and Liverpool are among those best shifting their businesses to align to FFP rules and to remain competitive not just this season, but for the next 20 or more.

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