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Tax and football: PAYE and NIC

25th Jan 2010
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The rest of us have to pay PAYE and NIC, so why do football clubs feel they can get away with it? Simon Sweetman reports.

There seems to have been a recent surge in HMRC’s activity in trying to recover unpaid tax (PAYE and NIC) from football clubs. At the lower end of the league, Kings Lynn of the Unibond Premier was wound up in November 2009 owing £65,000, while Rochdale and Accrington Stanley teetered on the brink. Higher up the pyramid, Portsmouth, Notts County and Cardiff City have been served with winding up orders. Southend claimed it had overpaid a tax debt of £2.1m a couple of months ago by £200,000, withheld that money from its PAYE payments and to nobody’s surprise it too is facing a possible winding up order.

In Cardiff’s case it would appear the club owed £2.7m, negotiated a payment plan, and failed to make the first payment under that plan. What would happen to one of your clients who did that?

Debt write-offs
Some clubs could have taken the hint. In October 2009 Mike Eland, HMRC’s director general for enforcement and compliance, wrote to the Financial Times. This followed an article by Simon Kuper which had suggested: “The government has quietly accepted that many football clubs will never pay their back taxes.”

Mr Eland denied this, and said: “Where clubs have a debt, we expect them to clear it – even if that takes time – and we will take action to recover the money or stop the debt growing if a club fails to come up with sensible proposals, or fails to stick to an arrangement.”

“That action often triggers an administration process which in turn usually leaves unsecured creditors, such as HM Revenue & Customs, having to choose between receiving a small payment or nothing. That is not the same as accepting that a club won't pay.”

In November 2008 it was estimated that the cost to the Revenue of accepting write offs from clubs in administration had cost £28m in unpaid taxes.

Now the problem is that the Enterprise Act 2002 removed HMRC’s preferred creditor status in administrations, meaning that when –as usually seems to be the case – a club in administration pays its creditors 5% or 10%, HMRC has to suffer along with the rest or refuse to accept a CVA. In the past, HMRC has gone along with CVAs, often reluctantly, because putting a football club into liquidation has been seen as on a par with shooting a puppy. Clubs now suffer a points deduction for going into administration, but mostly they emerge again.

What has made this more galling for HMRC (and, it must be said, for the large number of small business creditors that get paid 5% as well) is the FA’s rule that ‘football creditors’ must be paid in full (a rule that has no basis in law), so the club pays the outstanding wages and leaves HMRC to whistle for the PAYE. Frank Goldberg of BDO said, “HMRC has never accepted that defaulting on taxes is an appropriate way to manage a club’s cash flow and it takes a dim view of those who do.” He then suggests that they should take expert advice, though it seems unlikely that Premier League clubs routinely use street corner accountancy firms.

Bad press
HMRC has the usual problem here. The club spokespeople will go bleating to the press – especially to the local paper with whom they will have a cosy relationship – usually with a self-justifying tale about the unreasonableness of HMRC. They know that the Revenue will not and cannot comment on particular cases, so it is often only the club’s side of the story that gets reported. Too often, the local reporters don’t even realise it is PAYE that is in question.

We are now in the January sales window. This is the point at which football clubs (reluctantly) can raise some cash by selling players or saving money by sending them out on loan if they are leaned on hard enough. They can be remarkably recalcitrant, though. Portsmouth’s deal to loan David James to Stoke fell through because they were not prepared to go on paying enough of what Stoke felt were his exorbitant wages. (Was there any discussion of who would cope with the PAYE on those?) Now we hear that Portsmouth’s attempt to have the winding up order dismissed by the court has fallen by the wayside. Are we heading for the first Premier League car crash?

Next week, Simon Sweetman will look at the issues surrounding player image rights.

Further reading
Leicester City FC chairman charged
Football clubs under threat from HMRC
Money Laundering and Crime discussion group

Replies (3)

Comments for this post are now closed.

By User deleted
25th Jan 2010 13:47

Football and the tax-man

As someone with experience in this sector, I read this article with interest. The FA rule (that Clubs and players take priority above all other creditors) is an interesting point - I assume that it has never been tested in a court so far, but I would expect this factor alone to make other creditors focus on this sector as a higher priority when considering the safe collection of debts. But a couple more points come to mind:

1. It is not the first time HMRC (or formerly HMCE and IR) have looked at Football Clubs - I can recall several old stories going back at least to the early days of the Premier League, and witnessed fairly strong attacks from both former Departments in my own personal experience.

2. With the level of salaries seen in at least the Premier League clubs, it cannot be surprising that a certain amount of attention from HMRC is to be expected. Work the figures out for yourselves - I saw £150,000 per week mentioned in the paper this morning - that is an annual salary of £7.8m per annum for one employee - what's that in PAYE and NI - a few million each year just in respect of that one employee? And then there is VAT on many of the huge outward transfer fees (or some of them anyway) - it must make the biggest clubs among the largest groups of creditors of HMRC you will find. 

3. One might even speculate that the shady backgrounds of some of the people getting involved in our top clubs might also tempt the tax-man to focus on the sport - numerous business failures, offshore shareholders, lack of clarity about who is behind some of the consortia expressing interest in investing in some clubs, players owned by undisclosed investors, Panorama programmes about the game, transfer "bungs".....the list hardly inspires confidence in the industry as a safe market to do business in!


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By mikewhit
25th Jan 2010 15:27

Sauce for goose

Hang on, I thought that preferential treatment of creditors was a director disqualification rap ?

[plus failure to submit tax returns or pay over to the Crown tax or other money due]

Here's one way - use the monthly sums origially for the players to pay both player (at a reduced rate) and tax/NI - they still seem to afford the mansions and Ferraris - so they are up to date each month.

Then at the end of the year they can have a bonus if there's any left ! Works for the bankers ...


yes, it's probably unworkable - what do I know ?!

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By carnmores
27th Jan 2010 17:29


your solution is totally unworkable

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