RIP Chester City: Bad news for football debtors

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.