RIP Chester City: Bad news for football debtors

Posted by John Stokdyk PM | on Fri, 12/03/2010 - 15:52 2784 3 comments

Forget the suspense surrounding the Premier League title and relegation battles, several football clubs this month are fighting for their very survival. And having lost its big play-off in the High Court against HMRC, Chester City has been put out of business.

At a High Court hearing on Wednesday 10 March, Chester City FC 2004 was wound-up after failing to settle debts that included £26,125 owed to HMRC. Following the liquidation, the supporters’ group City Fans United submitted an application to The Football Association to reform the club and re-enter the league structure.

Other clubs facing a similar fate include:

Cardiff City – given 56 days at a hearing on Wednesday to settle an outstanding tax bill of £1.9m. Counsel Matthew Smith argued on behalf of HMRC that the club should be wound up immediately, saying that it is “plainly insolvent”. The registrar granted the reprieve until a third winding up hearing on 3 May, just after the season ends, on the basis that a third party may come to the club’s assistance.
Southend United - granted a 35-day extension by the High Court to repay outstanding debts, including £222,000 owed to HMRC. The club, which was unable to cover its players’ wages in January, argues that it has not settled the debt because a previous claim was overpaid.
Portsmouth – The appointment of UHY Hacker Young as administrator of the Premier League club will not be challenged by HMRC, it was confirmed this morning. On Tuesday the administrator made 85 of the club’s 300+ employees redundant to bring its cash flow under better control. While all this has been going on, the team itself has reached the semi-final of the FA cup, ensuring an appearance Wembly appearance and around £1m in unanticipated revenues.

As previously reported on AccountingWEB, this year HMRC has cracked down on football clubs that pay huge salaries to players without fulfilling their PAYE and other tax obligations. The enforcement of the Chester City winding-up order confirms that departmental patience has worn thin with sports clubs that have become increasingly reliant on “Phoenix” arrangements to exploit the system and avoid their legal liabilities.

Continued...

Arsene Wenger

cymraeg_draig | Fri, 12/03/2010 - 18:25 | Permalink

People critisized Arsene Wenger for not buying expensive players in January - BUT, Arsenal is one of the most, and pssibly the most, financially stable club in the league.

Other teams might win tropheys, but at least Arsenal fans know their team will be there trying again next year and the year after that.

Of course Wenger has degrees in both engineering and economics from Strasbourg University.
Perhaps the time has arrived whe football managers need more business skills and less footballing skills.

Football debts

JOANP | Mon, 15/03/2010 - 12:18 | Permalink

-- J Plimmer

I must agree with the last post but this will only work where managers are kept informed of the clubs financial position. In May 2008, following the sale of Liam Dickinson for nearly a million, Jim Gannon of Stockport County was given the balance around £300,000 by the Supporters Trust in control at the time. to spend on new players. As an accountant as well as a football manager he would never have spent the money if he had known of the unpaid tax bill and the loan that was being taken out with David Farms (which finally put them into administration). By the time he found out the clubs true situation it was too late. He did give them a business plan to follow but had he known 9 months earlier Stockport could possibly have avoided administration and all the attendant misery and uncertainty that has been the lot of the fans since then.

For those who don't know, Stockport are still in administration and urgently needing a buyer who can fulfil the Football Leagues criteria.

First there was Chester City then another

Anonymous | Wed, 17/03/2010 - 01:24 | Permalink

If clubs like Chester can shed their debts and then start a new Chester City and get a way with it then running a club into the ground becomes a rational business strategy.
After Enron and the banking disaster the public would be entitled to expect the financial regulations governing companies to have regained it's moral compass and tightened up the rules to stop what can only be called sharp accounting practices.

It's now questionable who now has the lowest reputation. MPs, Bankers or accountants.