Reading FC receives winding-up petition from HMRCby
The recently relegated League One club’s financial problems continue to deepen as HMRC looks to recoup unpaid taxes.
Football team Reading FC’s fortunes continued to worsen this week, after HMRC lodged a winding-up petition against the beleaguered club due to a string of financial charges handed down by the English Football League (EFL).
Reading was pulled up after a non-payment of PAYE to HMRC. Only a week prior, the Royals were also accused by the EFL of not paying their players’ wages in full and on time over multiple months during the 2022/23 season.
Reading’s owner Dai Yongge has also been charged with causing the club to be in breach of the EFL’s financial regulations.
This is the fourth time the club has faced a winding-up petition, with the EFL League One club managing to narrowly miss administration in the past.
The club was docked six points by the EFL for not complying with budget restrictions following a profitabiltiy and sustainability rules breach, landing the killer blow to the Royals’ relegation battle hopes and dragging the club into League One for the first time in 21 years.
Fellow relegated team Wigan Athletic was also handed a points reduction after they too had been found not to have paid player wages, leaving the Latics on minus eight points as they begin life in League One.
An HMRC spokesperson said: “We take a supportive approach to dealing with customers who have tax debts and only file winding-up petitions once we’ve exhausted all other options, in order to protect taxpayers’ money.”
In light of the recent news, a pressure group named 'Sell before we Dai' is looking to persuade the club's owner to sell up. The groups spokesperson Nick Houlton has argued that “despite his best intentions Mr Dai's stewardship has been an unmitigated disaster”.
However, the football club's CEO Dayong Pang told fans in an open letter that he was "confident" the club would "fully correct the mistakes that were made many years ago".
He added: "As a club, financially we continue to face a number of significant challenges and our owner, Mr Dai, is working very hard to resolve those issues to ensure the future of Reading Football Club is stable, successful, progressive and positive."
A systemic issue?
Sofia Thomas, head of tax at Juno Sports Tax, paints a very different picture to that of Reading’s CEO. She argued that the Royals’ recent financial woes are indicative of a wider systemic issue within league football and the “uncertainty that clubs are faced with each season”.
“Of course, best practice is to ringfence funds for tax payments. However, the very nature of the promotion and relegation across the English Football League system incentivises clubs to prioritise the use of funds to build the best team," she said.
Financial uncertainty from commercial and broadcasting deals has now become ingrained into lower league football. Thomas noted that this has contributed to clubs leaving tax debts “towards the lower end of the priority list” to their own detriment.
“These winding up petitions (Reading, Scunthorpe and Bury) are symptomatic of an industry which has previously been able to defer and default on tax debts and are facing the harsh reality that this is no longer possible."