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Yet another club gets away with not paying tax while paying millions to players. I think it's about time all clubs were forced to pay there taxes in full each month.

The CVA is based on paying back 20p in the pound based Andronikou's projection of 14,000 Season Tickets and £15m raised from the Pompey squad this summer. Most people would probably agree that this is unachievable. So what will happen then?

Well, if the club can't keep up it's CVA commitments, Andonikou can simply go back to the creditors and 'agree' a revised amount. Seems like a great deal until you realise that the Football League will impose points penalties on the club for failing to fulfill their CVA commitments.

This CVA wil become a millstone round the club's neck and drag them down to League 1.

Thanks Matt for a clear explanation of some less than clear issues. As a Southampton fan I actually hope that they do pick themselves up because they do have a lot of genuine fans, in any case I think we could find ourselves in the same division in the near future.

In some ways the "football creditor" rule is necessary to protect player and club contracts but I can't really see how it would stand up to a proper legal challenge from HMRC, surely in this case 20% should mean 20% for all. Also it would be interesting to see where the various ex-owners of Pompey fit into all this, they seem to have disappeared without trace.

Matt, so even with the CVA and Pompey out of admin, with possibly Chainrai as the owner... what's to stop him from building up yet more new debts and the club going through this whole process again?

1. At 9:43pm on 17 Jun 2010, masterEccles wrote:
Yet another club gets away with not paying tax while paying millions to players. I think it's about time all clubs were forced to pay there taxes in full each month.

I whole heartedly agree, you can pay £30k £40k even £70k a week but not a tax bill.

I do feel for Portsmouth fans but in this climate The Taxman should be getting every penny from everyone not 20% over 5 years.

Thanks for you persistance on the Pompey saga this season Matt. I'd be interested to know why Paul Hart voted against it - is he not a football creditor, and thus entitled to be paid off in full?

This comment was removed because the moderators found it broke the house rules. Explain.

Why is the owner of a club or business not liable for any NI/paye/vat debts? It amounts to theft from the public purse.

It seems that ownership of a football club has no responsibility except coughing up for transfer fees.

On the subject of tranfer fees, here's a way to practically kill off the transfer system:
Any club purchasing a player from another club should donate league points according to the value of the transfer fee (say one point per million or part million) the value decided by a neutral committee to avoid fraudulent payments and 'bungs'. The points to be deducted from their current season's total. The recipient club having the option to use them in either the current or following season.
This would help particularly clubs with a good academy system and penalise those with none, who rely on their riches to succeed.
It would have to be a FIFA wide system, of course and might mean an end to overseas poaching and greater home content in bread and butter football.

Thanks for the interesting blog Matt. Seen this situation quite a few times now with clubs going into administration and HMRC taking this approach, but to my knowledge they've never managed to be paid in full whilst football creditors always are. Not sure how much of this Portsmouth case is just HMRC grandstanding to try and change the rules?

Personally to clear up the finanial situation for all clubs on the future surely it would be sensible for clubs to:

1. Play transfer fees and footballing costs in full and immediately at the time 0f purchase.

2. HMRA AND football creditros to become prefered creditors in a administration situation (it is afterall the taxpayers money and should be protected)

Seems a rather simple and obvious way of sorting out the situation?

A good day for us fans but a sad day for common sense and the feelings of injustice amongst the people owed money. Paul Hart? A decent man who did a decent job and he was owed as well?
But HMRC are still targeting the club, the new owners of the club and NOT the real perpetrators of this sorry mess. What is the point? These directors will not be punished so where is the incentive to change their ways?
HMRC should be targeting them and threatening them with Bankruptcy or permanent disqualification as directors of UK companies. Only then will we see directors acting with responsibility. HMRC should try to help the club as these people were merely the custodians of a potentially large source of income for the public purse. Relegate Pompey to the Hants League and the Revenue would not only receive less than they are being offered but they terminate a valuable source of income for manyy years to come.
The Premier League should at last stand up and change the rules on financial reporting because they have assisted in this debacle. But that's another whole bunch or worms.

As a pompey fan I can't see the logic in not paying the taxes ASAP, with player sales the debt will grow and the percentage will change rapidly. As a means to an end why don't we pay in full to get the monkey off our backs and allow a clear run at repayments to creditors. Parachute payments could have been used up front to halve the tax defecit.

It is ridiculous to think that we are in the moral right not paying up.

Long live pompey!

Why did HMRC let their debts get so high before hitting the club with a winding up order. Yes it is terrible that any business can simply wipe away so much money that is owed to the revenue, but why did HMRC let it get out of hand? It sounds like someone at HMRC is responsible for the loss of something like £30m to the public purse.

I hope there is some way all creditors can act against previous owners and Peter Storrie to get some more of there money back. I also call on the football authorities to ban these people for life from having any further involvement in the game. Surely Storrie would fail any fit and proper person test if he tried to become a football club director again.

Possible interest from Ukraine & Canada..............will the F.A. never learn !!!!!!!

So the moral here is.....

Buy players & pay completely beyond your means.
Fund a FA Cup & European Cup run on funds you dont have.
Run up debts of over £120 million
Go into admin & 80% of debt flushed down the toilet
Cheat the public purse of millions
Start again afresh to have another push at the Premiership.

Now how do I become a football club owner ?

It's been an intriguing season for our nearest rivals and I don't think it will stop as it seems HMRC have the bit between their teeth. As always it's the fans that feel it the most.

A few questions for you Matt:

1) As in the past HMRC have contested CVAs withing the 28 day cooling period, which brings us to 15th July. Will the FL lift the transfer embargo before that date or wait for the final approved CVA on the 15th?

2) As AA has had some history in massaging company figures, what are the likely outcomes if HMRC go to court about this with the latest increase in unsecured debt from £105m to £131m?

3) Would Storrie, Mandric and Redknapps tax evasion charges effect the club in any way if found guilty?

I look forward to HMRC investigating what got my club into such a mess - so long as that includes an investigation into how the taxman can hyper-inflate the debt owed by a club from £13.5 million to over £30 million in the course of a few weeks. Even the banks weren't allowed that degree of usury - and their practices were deemed unfair and have had to be pared back.

So as well as helping MY club through my season ticket, matchday programmes and the odd pie I now have to finance one of our opponents (who are already receiving extra financial support by means of parachute payments) through my taxes. Hardly a level playing field

Going forward, unless Pompey find a new owner with substantial funds to either wipe off the debts immediately or quickly, then their finances will always be under pressure.

1) HMRC will be watching them like a hawk forever more.
2) Clubs will insist on immediate payment of any transfer & loan fees, no more spreading it over years.
3) Players and agents will be much the same.
4) Suppliers will be much the same and even want money up front before giving Pompey goods and services
5) I imagine this debt repayment plan leaves very little room for maneuver, so the "cash in hand" the club has will be very limited unless it achieves promotion to the Prem.
6) I presume one failed debt repayment to a creditor could mean instant administration again?
7) All the above adds up to a cashflow headache

It's still galling that the people responsible for this mess have got away with it. The whole scale of the debt even could be construed to have been a deliberate ploy to gain an distressed asset via the backdoor.

#9 your second point about the HMRC becoming a preferred creditor was the case about 10 years back. I don't know why the rules were then changed in which they were then dropped.

#16 The HMRC debt could go that high because they are challenging in the courts about image rights payments as at the moment I believe a lot of clubs pay huge amounts of money to their players through this way as it avoids any VAT and or NI/PAYE. If the HMRC win the case they will then be able to make additional claims to most of the clubs out there.

I do hope that the new coalition government redress the footballing preferred creditors rule as illegal so clubs have to run properly with each other.

So let's see.....

A club racks up huge debt, goes to court in January to avoid a winding up petition with a Statement of Affairs document, produced by a company called Vantis.

That document was used and accepted in a Court of Law as accurate. At that time Pompey's debts were totalled at around £78M.

So, as it now transpires that the debt is actually WELL over £100M - why isn't Vantis being chased? Surely if during administration they now owe about another £50M this merits more investigation?????


David Lampitt - why would he leave a job at the FA to take a CEO role at Pompey? If Peter Storrie is still there as a 'consultant' after he was on the board when the overspending was rife - is that ethical?

How can it be that the owner of the club, (has he passed the Premier's FPPT?) can choose to put the club in admin - declare he is funding the admin process (surely the company should be self sufficient during that process??) and then come out with the club, virtually debt free???

It's not a great day for Pompey fans to be honest. It's just they've sat down on the top of a very slippery slide.

More questions than answers....as always.

once again you and I have been robbed (we will have to make up the shortfall in tax) and overpaid players and executivfes at the club escape scott free. I for one hope HMRC appeals, wins the appeal and then rejects the CVA

"This CVA wil become a millstone round the club's neck and drag them down to League 1."

Given that the alternative is liquidation, I can't see Pompey would have much to complain about there.

Post #16: HMRC have fined the club for late payments of tax and issued tax on other income.

I'm not sure why fans think it would be a struggle to pay 20% over 4 years (£6.5m per year) when parachute payments will bring in £48m over the same term.

As HMRC have not received the taxes from the individual players at PFC, why doesn't HMRC go after the players directly. The players would then need to claim this tax money from PFC, so the footballer would now become a football creditor. This way the taxman would get 100% of owed taxes (as the player would have to pay HMRC what is owed) and the players would also get their 100%, as their claim would be a football debt that also needs to be paid off in full.

Andronikou is a genuis. The revision of the HMRC voting power by omiting the cotnentious debt is administarting gold.

www.tobymeyjes.co.uk

So in nine months time from the CVA which fits nicely in with the end of next season so who knows what league they will be in,is it possible that when the company as it is now is liquidated that no one agrees to form a new company therefore the assets like Fratton Park fall conveniently into the hands of secured creditors like Gaydamak? and the club is no more.
20p in the pound is by my sums is £350000 per month over 5 years.
Isn't the parachute payments for football debts and how do the secured creditors get their money back?
Also what about the 10% that the fans now own not much mention about that?

This comment was removed because the moderators found it broke the house rules. Explain.

The sooner the club is wound-up the better for the long term future of football in Britain.
This is the only way to send the mesage to everyone else, that living within your means is the only option, if you fail to do this then you won't get away with it.
Sadly though as it stands, it looks like poor ownership, the racking up of massive debts and basically cheating your way to FA cup glory and having a European adventure is acceptable, as the only punishment for spending beyond your means is paying back 20p in the £.

I find the comments by the likes of freddawlanen at best disingenuous and at worst downright dishonest. If they are Southampton fans in disguise wanting to put the boot in then be honest and say so. Portsmouth no more cheated their way to an FA Cup win and a second FA Cup final than Chelsea and Manchester United have cheated their way to FA Premiership titles. The fact is that the Premier League's rules on ownership and fiscal management are not fit for purpose.
Chelsea would not have won their titles without Abramovich's investment which, until recently, sat as a huge debt on their balance sheet (which he has now commuted into shares - I wonder why?). Manchester United are the largest debtor club in this country because premiership rules allowed the Glazers to pay money they didn't have to the previous owners and then load that debt onto Man United's balance sheet as debt - exactly as the owners of Portsmouth, since Mandaric, have done. Don't even think about Liverpool.

If Portsmouth were a business in any other industry but football they'd have gone bust long ago.

It's about time a club got what it deserved for not paying the taxman and went out of business for the good of the game. It would be terrible for the fans but unfortunately some club needs to be made an example of.

In response to Tyto Alba, you can see from my username who I support.

I have no problem with you personally, or the majority of the Pompey fans, but to say that Pompey didn't cheat their way to the FA Cup Final (at least once) is being a bit too charitable.

If you look at the chain of events THIS season - back in January, Pompey wanted their temporary embargo lifted so they could SELL players to improve their fiscal situation.

This was around the time where they were in the High Court. Yes they eventually shifted two players on, but they also brought in Owusu Abeyie, Tosic, and resigned Jamie O'Hara.

Do not forget at this time, Pompey were proven in a court of law to have been operating whilst insolvent.

Those loanees (who also cost money to bring in - how much was Abeyie? £500k?) enhanced Pompey's squad and all of them (Abeyie and O'Hara specifically) contributed to your FA Cup Run.

You beat us at St Marys - who made the difference that game when he came on?? Abeyie - and O'Hara also scored.

Wonder how the Birmingham and Spurs fans feel as also knocked out of the cup, about how 'fair' it was for Pompey to still bring players in when they couldn't afford it.

So yes, Pompey DID cheat. They signed players they knew they couldn't afford to pay.

That's the difference between Pompey's situation, and those around Chelsea, Liverpool and Man United. The other three have been paying their bills.

I'm actually a Wigan Athletic fan Tyto alba, a club that understands what spending within your means, actually means.
The way my club is run and the relative success we've had (being a PL side now for a sixth consecutive year), is based on sound financial practises, whereas Pompey deliberately spent money that everyone with a brain realises they could never afford.
So why aren't they being wound up?
Why are previous owners and executives not facing criminal charges?
Yes, the FA themselves are unfit for purpose, but that still doesn't mean that Pompeys FA cup success and European adventure wasn't acheived by cheating, it was gained by spending far more money than they were ever able to generate, in my book that IS cheating.

At Swindon, we've seen a lot of AA's antics over the years, to a point where he was calling supporers 'busybodies' who didn't agree with him, and instead of acting in the creditors best interests, he was acting as a spokesman for our old board, when they were trying to hold onto the club, despite the final 'bullet' payment was late and the old board had admitted they didn't have the money.

What he has done, in regards to the CVA, is a similar thing the administrator tried to do at Leeds, when on the day of the meeting extra invoices were mysteriously found to reduce the percentage of the debt that HMRC were owed to less than 25%. HMRC went to court there and won, and it cost Leeds an extra 15 point deduction. I can see the same thing happening here.

And going back to AA, he's eventually got round to signing off our CVA off at Swindon, despite the new owners paying off it almost two years ago. Hopefully we won't be seeing AA anytime soon.

I'm staggered at the enormity of the dodgy dealings been going on at PCFC over the past few years. I sincerely hope that the FA and FL are consistent in their application of penalties for financial mismanagement, following the clear admission by Andronikou that the company was trading whilst insolvent.
Quite who is responsible for the legal prosecution of the company and its directors is unclear. Is this HMRC's job?
Furthermore, who is responsible for overseeing the validity of an administration where debt figures have doubled since the SOA and debts have been adjusted by Andronikou to a point where HMRC are marginalised?
Who does Andronikou answer to? Should he not be getting the best deal for the creditors, instead of Balram Chainrai? Griffin's proposals are quite workable and would still allow the club to survive at a level commensurate with their income. So why was this not discussed at the CVA meeting?
Even more incredible is why only a further 5p in the pound is deemed to be an 'acceptable bonus' in the event of PCFC getting promoted back to the PL - an event which will net the company at least another £100m in PL payments and further parachutes. A prudent and responsible club, e.g. Burnley, would clear/honour their debts, not just 5% of them.
Miffed? Too right I am!

If I were Pompey I wouldn't be concerned about HMRC having 28 days to appeal, in my experience it takes HMRC that long to answer the phone.

Hi Matt, enjoy your blogs as always.
but i have to burst this particular bubble of optimism.
Portsmouth will not be playing championship football next season!

the owner balram chanrai and his closely associated administrator have been playing a dangerous game of brinkmanship with HMRC. hoping at each turn to call their bluff.
HMRC have been patient, given some leeway and enabled firstly a questionable administrator to oversee events, and then allow the proposal ov a CVA to proceed.
Chanrai and the administrator have pushed the HMRC too far, after getting these compromises agreed, whilst still keeping all the detail of what the clubs finances are actually like secret. they deliverd the final insult by reducing HMRC voting rights in the CVA.
can you really see HMRC now giving up after rightfully challenging this confused and secretive process time and time again?
no they will push now for a court hearing and this time given its to debate a CVA all the facts will be demanded by the court.
this will take some time to be investigated and any decision reached.
meantime pompey will receive their second points deduction for being unable to exit administration and the house of cards will tumble very quickly after as attempts are made to cover tracks and bury bodies.
so sorry for the pompey fans, but the owner, administrator and previous associates are about to be held to account. 19th June 2010 you heard it here.

I am confused by your assertion el diablo. While I can quite believe HMRC won't let (at least some) of this affair to drop, I can't see how Portsmouth 'will not' be playing Championship football next season. I also can't see how they will be starting with a points deduction in the Championship either.
Pompey have already taken their punishment of 9 points for entering administration in February. According to the rules the club now has 18 months to obtain a CVA and exit administration. If they fail to do so they could well be looking at a points deduction, but not until the start of the 2011-12 season at the earliest. Stockport, for instance, are still in administration, having gone into it in April 2009. They only lost their 10 points in the 2008-09 season.
HMRC's issues are more targetted at football in general than Portsmouth in particular. My guess is that HMRC will be satisfied if they can get clarification of the law in respect of image rights and the football creditors issue. Obviously they will be hoping any judge would rule in their favour. The timeframe for any such court procedure is lengthy, but will relate to the old PCFC company which is scheduled to be liquidated as part of the arrangement anyway. As a result, I think some kind of compromise will be hammered out to allow the pertinent issues to be tested in law, while allowing a new PFC company to be formed using the 'agreed' CVA.
While Portsmouth are far from out of the woods, much will depend on whether the club can attract new investment and rebuild trust with its fans to persuade them it is worth buying a season ticket. It is interesting to read some comments from Saints fans on here about PFCs situation. Twelve months ago SFC were a couple of days from being liquidated themselves, so there is an element of chucking stones in glass houses here it seems to me. They were fortunate enough to be bought by a wealthy investor. Let's see what the next three or four weeks brings for PFC...

@on_y_va.
not a SFC fan so no axe to grind there. although their position last season was interesting. but it has to be remebered they had a fraction of the debt, a newish stadium and a lot less overall dodginess happening.

why will PFC not be playing championship footy? simply becaise the CVA will be challenged and not resolved by the season start. which is where the minimum 15 point deduction comes in, followed by owner, administrator et al dropping it like a hot potato.
lets not forget old harry and peter storrie have still to come to court and that is inextricably linked to whats happening at fratton park now.

i can tell you with certainty the HMRC will oppose and stop the currently proposed CVA. the administrator is playing a high risk strategy that HMRC will let it go if he pushes to the brink.

the current coalition government will insist HMRC persue this to its ultimate conclusion. all the play around new manager etc is to try and get hmrc to throw in the towel. they won,t and more peole like steve cotterill will become victims of the Chairai/Andrwhatsit debacle.

@on_y_va

Well comparing our situation last season with yours is like comparing Chalk and Cheese.

We went into administration, as our overdraft facility with Barclays was reduced overnight - we couldn't TRADE SOLVENTLY from that day forward and Rupert Lowe (gawd bless him) took the decision to bring the administrators Begbies Traynor in.

Why did he do that? Because it is AGAINST THE LAW to trade whilst knowing you are doing so insolvently. Any director can be prosecuted for that - hmmmmmm how long were Pompey doing that for I wonder?

Yes we have struck gold with Markus Liebherr, but consider this - for around £15M he got this - a 32,000 stadium which is less than 10yrs old, a Training Complex (now being redeveloped) which is already at Premier League status, other parcels of land AND the club thrown in.

Compare that with Andronikou wanting £30M for Pompey - no ground, no training facilities, and not a lot else. Just your fans.

Is that a tempting deal for ANY investor? Only for Chinarai who will stick around for parachute payments.

The biggest difference between Saints and Pompey in admin? We paid our bills - Pompey didn't.

I bet St Johns Ambulance were grateful for the donations of the Pompey fans to settle what they were owed - it was more than the people running the club ever did.

#14 is correct. £100m wiped out, and all it cost the club was 9 points that didn't affect anything.

It must be time to introduce automatic relegation and a 1 yr FA Cup ban for any team that goes into administration now. How many more examples do they need of teams benefitting (Stockport, Palace etc).

i support southampton and im sure i speak for the majority of our fan base in saying that im not dissapointed to see portsmouth take a big step towards safety. I enjoy the rivalry and its good for the game, i know that when we went into administration a lot of portsmouth fans would have liked to have seen us go under but then that shows the difference between the two groups of fans.

@el diablo
Still not sure what you're suggesting. Do you think that PFC will be liquidated, therefore not playing anywhere at all? If PFC get a points deduction, as you suggest, they will still be playing Championship football next season?The court cases you mention have no direct bearing on what may, or may not happen to PFC over this CVA. They are cases against individuals, not the company. If HMRC oppose and stop the CVA the public purse will get next to nothing. I agree there is a high stakes game being played here on all sides. HMRC will pursue its (justified) grudge against football for sure, but will find a mechanism to do so using the proposed liquidation of PCFC, rather than opposing the CVA.
@saintly
I'm not really making a Pompey/Saints argument out of this. You are right that PFC and SFC's administrations were very different things, not least because SFC was held by a PLC (which was what technically went into administration) and not a private company. If we are talking about 'cheating' then we could get into a debate about SFC's attempt to avoid their 10 point deduction. The Football League's discretionary powers should also be a warning to Portsmouth...
The Portsmouth situation is complicated by the complete lack of transparency surrounding their finances once Ali Al Faraj took over in October. The level of 'debt' PFC had for CVA purposes is meaningless. In March is was independently thought to be around £78m, with HMRC owed £17m. That figure has risen by a third subsequently and HMRC now reckon they're owed twice £35m. Why? Because PFC are a useful test case for HMRC over its two main bugbears: the football creditor rule and players' image rights payments. HMRC's goal is to get football, not PFC in particular, hence my belief that they will find a way to test their case without challenging the CVA, which if PFC were to be liquidated would end up losing the taxpayer even more. Saints went into administration with debts of around £30m. If Liebherr got SFC and its assets for just £15m and lost that debt, he did indeed get a bargain. The attractiveness of PFC depends largely on the attitude taken by the likes of Chainrai and Gaydamak in the next few weeks. If Fratton Park and the land around it can be sold as a job lot, PFC is a more than reasonable bet for someone.
@hudjer
Don't disagree.

@ y_on_va

A couple of things, Saints had a debt of £4m (reduced from £6m that season) to Barclays and a mortgage (based on repayment plus interest) to Norwich Union. The mortgage was being serviced as was most other bills. A 40k cheque was the cause of our admin.

The current owner negotiate with both Barclays and NU about paying of the debt in full and early so of course they didn't pay the interest.

I think you're right PFC will be in the CCC but that is regardless of what actions HMRC take.

At the current status PFC have done well out the admin process or at least the owner has so far, being able to wipe so much debt without being hit by any penalties that have made a difference. It could be a blueprint for other clubs to enjoy some good times by over spending if most of the debt is wiped out and only a possible relegation at the end of it.

It's been a fascinating story so far (with hilarious aspects from a saints fan pov) with I think many twists to come with HMRC and the FL to have their say in the matter.

For "Treasury officials" read "The Taxpayer". You don't seem to think its an issue Matt, and that we should celebrate the survival of a club that has systematically lived well beyond its means and has got away with copmpletely shafting us, the taxpayer while the players and directors' have walked away with millions. How can you possibly think this is a good thing ?

Nothing against the Pompey fans, but I really hope the Inland Revenue sticks to its guns, challenges the settlement (since they are claimimg more than Pompey are showing in the financial statements) and makes them pay.

@Saintly

"That's the difference between Pompey's situation, and those around Chelsea, Liverpool and Man United. The other three have been paying their bills".


Not all, they are using the image rights system in order to avoid tax.

Why is the HMRC not taking all the clubs up on this?

Why are they not taking players to court over this?

Talking of treating the tax payer fairly: is it right that MU laoded with debt by overseas owners means that they have no corporation tax to pay?

@Tyto Alba

"Chelsea would not have won their titles without Abramovich's investment which, until recently, sat as a huge debt on their balance sheet (which he has now commuted into shares - I wonder why?)".

Not as straight forward as that. All that has happened is that the debt from one company to the football club has been changed to equity (They own the club). The debt is still outstanding to RA. All it means is that the holding company now owes RA.

Chelsea FC is still up to its eyes in debt.