Bolton Wanderers hit with winding-up petition
Cash-strapped Bolton Wanderers was served with a winding-up petition from HMRC on Thursday over an unpaid tax bill.
A statement from the club confirmed that the club “has now received a winding-up petition from HMRC in respect of unpaid PAYE and VAT for the month of November”.
Bolton’s financial situation has significantly worsened over the past month, with the club confirming that it was unable to pay its staff for November due to a ‘short-term funding issue’ caused by ‘the ongoing situation surrounding the club’s ownership off the field.’
The club, who were relegated from the Premier League in 2012, is believed to have run up debts in excess of £160m and requires around £5m just to continue trading until the end of the season, including £900,000 to cover running costs for last month.
The Trotters had hoped to conclude a takeover last week after drafting in financial adviser Trevor Birch to assist the negotiations, as long-serving Chairman Phil Gartside is currently suffering from a long-term illness.
In a statement released after the news of the winding-up petition had broken Birch said: “Quite clearly the club remains in a critical financial position.
“We will continue to try and finalise a sale or alternatively raise some short-term funds needed to give the club a breathing space and time in which to consider its options.”
The club’s owner Eddie Davies, to whom the majority of the clubs debts are owed, has indicated that he was willing to wipe out £185m in loans owed to him in order to facilitate the sale of the club, which is available for around £15m.
However, although takeover discussions are still ongoing with a number of parties, they are thought to have been held up over reservations about the amount of money borrowed by the potential purchasers.
HMRC therefore rejected requests for more time to conclude a sale and called in unpaid PAYE and VAT for the month of November.
HMRC ‘moving to the front of the queue’
According to football finance expert Rob Wilson, the winding-up petition is part of a strategy HMRC have been pursuing against professional sport for the past four or five years.
“Over the past few years HMRC has made a big play of saying ‘we’re not happy about the way professional sport is going about its business, so if they owe us money we’ve got a duty to the taxpayer to recover it’,” Wilson told AccountingWEB.
“There’s a spurious rule in professional football that all football-related creditors are paid first in administration cases. It’s a bit of a crazy rule because if you follow the logic it’s those football-related creditors that are the problem.
“The players will be paid their wages before anyone else, and they’re the people whose high wages are putting these football clubs into financial difficulty in the first place.
“You end up with Betty’s Café down the road that’s been supplying Leeds United with bread for the last ten years that end up going out of business because they haven’t been paid.
“HMRC has got wind of that, is not happy about taking a small proportion of their money back so that’s why they’ve been issuing these winding-up petitions for professional football clubs – it moves them ahead of the football-related creditors.
“In Bolton’s case, the club still has all these outstanding creditors now asking for some of their money back, and HMRC has made sure they’re at the front of the queue.”
Petition increases chances of administration
The winding-up petition increases the likelihood of one of the football league’s founding clubs going into voluntary administration. Although this would put an immediate halt to the winding up petition, it would also result in the Football League authorities deducting 12 points from Bolton – a decision that could condemn them to relegation this season.
While relegation would not harm the club’s finances to the extent that relegation from the Premier League did, it will mean another big drop-off in revenue that may put off potential new investors.
The petition will now be advertised publicly and according to reports a High Court hearing has been scheduled for January. It is not known if the bill can be settled before the High Court appearance, at which the club’s survival could be down to the goodwill of the presiding judge. Adjournments have served football clubs well in similar hearings, but this does not act as a guarantee that one would be granted in this case.
The alternatives for the club at this stage seem to be as follows: to persuade Eddie Davies to put his hand into his pocket one last time; to try and come to an agreement around the selling of the club before January’s court appearance; or to accept administration and the almost inevitable relegation that comes with it.
For Bolton supporters, who as recently as 2005 saw their side finish fifth in the Premier League, none of those choices will seem particularly palatable.
Sheffield Hallam’s sports finance expert Rob Wilson has been following the fortunes of Bolton Wanderers for a number of years, and believes that the club’s current woes are mainly down to its ownership model.
“The club have been running at a loss for a number of years”, said Wilson, “and in those years they’ve had anything from as bad as a £50m loss over the course of the season. Last year’s was about £9m.
“The reason they’ve got away with it until now is because they have a pretty wealthy backer [Eddie Davies] who’s been prepared to underwrite those losses so they could continue trading.
“The fans have known that the financial position wasn’t particularly healthy, but the club has continued to be solely and heavily reliant on investment from the owner.
“Chairman Phil Gartside has been the buffer between the football club and the owner. Unfortunately we’re led to believe that Gartside is pretty unwell and that’s meant that the owner doesn’t feel he can continue with the football club, and that’s what’s caused them a problem.”