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News - 22 March 2012

Football in crises

Over the recent years, the financial problems of football clubs have become as common as the mad frantic rush for signatures on Transfer Deadline Day.

We cannot open a newspaper, turn on the radio or television without hearing about the problems at Rangers FC, but they are not the only ones that the spotlight of HMRC has focused upon.

The financial weakness of football clubs are often self-inflicted when the club management does not deign to make PAYE and NIC payments which HMRC is bound to recover. The tax department has brought a High Court challenge against the English FA’s Football Creditor Rule, which holds that clubs must settle debts with players and other FA members ahead of other creditors. A verdict is expected imminently, but while we await the decision, here is a round-up of other clubs in crisis:

Portsmouth Football Club has entered into Administration for the second time in three seasons. The 2008 FA Cup winners were placed into administration at a High Court hearing on Friday 17 February 2012 after they were issued with a winding up petition by HM Revenue and Customs on 03 January.

The club received a 10-point deduction due to the administration, deepening the threat of relegation as they now currently sit at the forefront of the relegation battle. Should the club be relegated it would have a detrimental effect on the attract-ability of new investors to keep the club alive.

The club has debts of around £4m, of which around half is owed to HMRC in unpaid tax. Other creditors include West Bromwich Albion, Wolverhampton Wanderers and Bristol City Football Clubs, the Football League itself, and Portsmouth City Council.

The administration order came after the club’s parent company, Convers Sports Initiatives, went into administration in November 2011.

Birmingham City FC was hit with a transfer embargo after the Championship club failed to lodge its 2010-11 season accounts by the FA’s 1 March deadline. The club’s parent company, Birmingham International Holdings, said that interim results for the six months to 31 December 2011 would also be delayed, reports the Midlands Newspaper The Express and Star. The club also failed to file accounts to the Hong Kong Stock Exchange last month. Meanwhile, leading shareholder and club president Carson Yeung has been charged with money laundering offences. His assets have been frozen while he awaits trial in Hong Kong, adding to the financial pressures on the club.

Coventry City FC was also hit with a transfer embargo after the Championship club failed to lodge its 2010-11 season accounts by the FA’s 1 March deadline. However, the club's board insist that the situation is not serious. City avoided going into administration by just over 30 minutes in 2007 when Ray Ranson took over the club, while they needed a cash injection from the owners, Sisu, last March to avoid a similar situation.

Port Vale FC before its game with Accrington Stanley on 3 March Port Vale denied that it had gone into administration following a BBC report that it had been served with a winding up petition by HMRC over its unpaid tax bill. But a few days later the inevitable happened and the club was docked the now-familiar 10 league points after Administrators were appointed. The move was sanctioned by Stoke City council, which provided a £600,000 temporary bail-out to stave off the HMRC winding-up petition. The administrators remain hopeful of finding a buyer.

Dunfermline FC the Fife club confirmed players and staff had not received their full February wages while it awaits £85,000 from Rangers for tickets sold by the Ibrox club to Dunfermline fans. Dunfermline has also revealed an annual loss of more than £430,000 for last year after paying £185,000 in bonuses following their promotion to the Clydesdale Bank Premier League.

If you need any help and advice with your PAYE or general Bookkeeping, or looking to outsource your Accounting Department, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar NOW to discuss how ABDS can help in all your business matters.

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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