Portsmouth beats HMRC in court
Portsmouth Football Club won its most important match of the season without kicking a ball as Mr Justice Mann found in its favour in HMRC’s challenge to the club’s company voluntary agreement (CVA).
The tax department argued that the club owed more than £37m in back taxes – some £13m more than the £24m allowed for its claim in the CVA put together by UHY Hacker Young administrator Andrew Andronikou.
Contrary to previous claims of up to 65p in the pound being returned to creditors, the deal put together in June promised 20p in the pound for the club's unsecured creditors over four years. HMRC put forward the additional claim for £13m based on payments made into offshore accounts to players for image rights.
The image payments were “a sham”, HMRC’s counsel Gregory Mitchell QC told the court on Tuesday. “There was no commercial basis... PAYE should have been paid.”
HMRC also put forward its arguments against the Football Creditors Rule which, Mitchell said, lets one class of creditor scoop the pool “and the rest are left out in the cold”.
Because the club’s football creditors enjoyed preferred status under the CVA, they should have been allowed to vote on it, he added.
But Mr Justice Mann was not convinced by any of HMRC’s lines of argument. Since the Exchequer stood to lose £6m under the CVA if HMRC won its challenge, the judge commented: “In my view, HMRC will not be worse off by the situation left by the CVA bearing in mind what the alternatives could be for the club… liquidation, or expulsion from the Football League or worse.”
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