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Bolton Wanderers hit with winding-up petition

14th Dec 2015
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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.

Why now?

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.”

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Replies (14)

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By AndrewV12
14th Dec 2015 11:28

Relax

No football team has been closed down to date by the HMRC, around 60 league clubs have gone into administration, the big losers are not the clubs but lenders and HMRC, HMRC previously have had to settle for 10pence in the pound, but they are taking a much harder line now.   

 

Football clubs use administration as a process of walking away from liabilities, though the clubs do have points deducted.   Barry Heare wanted automatic relegation for clubs that go into administration, unsure what happens if more then 4 teams go into administration in one season.  

http://forums.digitalspy.co.uk/showthread.php?t=1261492

 

This forum is not for the faint hearted

http://www.urban75.net/forums/threads/barry-hearn-and-administration.244...

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By Tom Herbert
14th Dec 2015 12:21

Fruity

Thanks for that @AndrewV12. Definitely some fruity language on those forums, but it only goes to show the strength of feeling among supporters.

It is true that HMRC haven’t wound up a single club; in this case the winding-up petition seems to have speeded up the march towards administration.

I think the wider frustration comes with the lack of structural change at clubs. If things continue at the current rate then a number of clubs currently living it up on the Premier League pound will find themselves in the same boat as Bolton in a couple of years’ time. Some can bounce back like Southampton, but others like Blackpool just sink.

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By AndrewV12
14th Dec 2015 13:37

Good points Tom

TomHerbert wrote:

Thanks for that @AndrewV12. Definitely some fruity language on those forums, but it only goes to show the strength of feeling among supporters.

It is true that HMRC haven’t wound up a single club; in this case the winding-up petition seems to have speeded up the march towards administration.

I think the wider frustration comes with the lack of structural change at clubs. If things continue at the current rate then a number of clubs currently living it up on the Premier League pound will find themselves in the same boat as Bolton in a couple of years’ time. Some can bounce back like Southampton, but others like Blackpool just sink.

 

Hi Tom

Great points well made, yes I agree why is it teams like Southampton FC, Norwich FC, West Ham FC, WBA FC, Derby FC all bounce back, some just never return Barnsley FC, Blackpool FC, Coventry FC, Charlton FC, so far Portsmouth FC are the only Premier league club that has gone into administration.

Yet another Tabloid  headline on this site BOLTON WANDERERS HIT WITH WINDING UP PETITION. 

However for those with a little time on their hands it may be worth reading the following article, only £750 I hear you cry.

https://www.gov.uk/wind-up-a-company-that-owes-you-money/overview

 

Also a winding up petition is not as bad as what it sounds it can be sidestepped by: 

An Administration Order, if granted by the court, will "stay" or stop the winding up petition and prevent a winding up order being made and any other legal action (except with leave of court). 

The administrator may propose a Company Voluntary Arrangement to protect the business and allow a repayment of debts for up to 5 years. Alternatively, it may be sold to a new company or buyers (including you as directors). See the administration guide pages here. 

 

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By JCresswellTax
15th Dec 2015 09:04

Unfortunately

I see my beloved Aston Villa going the same way :(

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By TaxTeddy
15th Dec 2015 09:28

Not the Villa

Never. No way. Not a chance.

Actually, now you mention it .... we do have an American in charge so anything is possible. Never thought I would look back fondly to the days of Deadly Doug Ellis.

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By JCresswellTax
15th Dec 2015 09:33

Agreed

Sad times, championship beckons and I can see us being more like a Leeds than a Southampton :(

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By TaxTeddy
15th Dec 2015 13:07

I can remember....

.. the old Third Division days ; Bruce Rioch, Chico Hamilton, Andy Lochead.

Actually, Villa Park was fun in those days - so maybe we'll see a return to the fun times. Every cloud...

 

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By AndrewV12
16th Dec 2015 09:58

No clubs have gone out of business yet

Relax to date HMRC has not closed down any football clubs, HMRC does not want to be seen as the bad guy, but George Osborn is really turning the screw of late, so who knows.

Its funny HMRC gets on some a local business  case, and the future can look bleak, possibly ending in a court case, HMRC gets on the back of the local football club, and  HMRc is seen as a bully boy and backs down straight  away.

Football has turned a corner, someone actually failed the fit and person test, previously no one had failed the test, including Dictators, Mystery men, fraudsters, speculators.

 

Once upon a time football clubs were run by the local odious  owner, then it moved on to the Nations   odious folk and now its the worlds Odious folk.

 

 

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By IANTO
16th Dec 2015 12:59

Football club finances

It's about time that the ridiculous player salaries are capped, as they were in the old days. Most premier league club players earn more in a week than top flight rugby players do in a year. Top class rugby will still be played in Swansea, whether or not at the Liberty Stadium, after Swansea return to their natural position in the league. Sorry chaps.

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By mikanary
16th Dec 2015 14:18

Swansea

...is that in the Welsh league?

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By IANTO
16th Dec 2015 14:27

Swansea

"is that in the Welsh league?" it will be in a few season's time! and top class rugby will still be played in Swansea, given that Ospreys players figure in the Welsh and Lions rugby teams!

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By mikanary
16th Dec 2015 14:38

Swansea

Sorry, I was referring to their football team.

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By IANTO
17th Dec 2015 12:26

Swansea football team

The fundamental difference between Swansea's football team and the Ospreys and Swansea rugby teams is that in order to remain in the higher divisions, Swansea, like all other teams in those higher leagues, need to buy expensive players who have not necessarily been nurtured in the local area. When Swansea football didn't have the funds to buy such players, Swansea languished in the old 4th division and was on the point of exiting the league. This was at a time when local rugby, i.e. Llanelli were beating the famed All Blacks, the current rugby World champions. The rugby approach is different. The core of rugby players for the regions, is taken from local teams from the lower leagues via the academies. Yes, there are a few foreign stars, but the majority is nurtured in this way. If a fraction of the money that washes about in football were distributed to the rugby environment in the UK, then perhaps England would not have had such an abysmal rugby World Cup campaign!

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By mikanary
17th Dec 2015 14:46

England Rugby team

I think that with the amount of money already awash in English rugby they should not have had such an abysmal World Cup campaign. Mind you, the same applies to English/British tennis!

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