There can be no doubt that the abbreviation HMRC is one which has hit pretty well every football fan’s radar screen recently. There have been the two big Administrations at Portsmouth and Rangers. Bubbling away in the background is not only the issue of whether clubs’ use of Employment Benefit Trusts constitutes tax evasion (and is hence illegal) or merely tax avoidance (perfectly legal), but also HMRC’s challenge to the legality of the Football Creditors Rule, which has seen it take substantial hits in its revenues since the Crown lost its ‘preferential creditor’ status in 2003, which resulted in ‘football creditors’ coming higher in the ‘pecking order’ when things went pear-shaped. At present clubs in Administration face an obstructive HMRC when seeking to enter a CVA which would see HMRC being paid anything less than 100p in the pound.
Has the general approach of HMRC to football clubs changed over time? It states its position pretty consistently, as it did thus with respect to Rangers: “We can’t discuss specific cases for legal reasons, but tax that has been deducted at source from the wages of players and support staff, such as ground keepers and physios, must be paid over to HMRC. Any business that fails to meet that basic legal requirement puts the survival of the business at risk.“
So, just what is HMRC’s track record over time in pursuing football clubs? I’ve been researching its propensity to ‘present a winding-up petition’ against a football club, and how it’s changed in terms of frequency over the period since 1960. Some of the outcomes are unsurprising, but others may be a little surprising.
The full data set is available here, and I will endeavour to keep this list up-to-date. It covers all English and Welsh clubs, but not Scottish clubs, and has been developed by searching the London Gazette database.
Here are some thoughts on what I found:
- HMRC and its predecessors (the Inland Revenue, who were responsible for collecting direct taxes such as income tax [including PAYE] and National Insurance contributions, and HM Customs & Excise, who were responsible for collecting indirect taxes, notably VAT, merged to form HMRC in April 2005) seem to have shown little favour towards League clubs, and even less to non-league clubs.
In total since 1960, they have presented a total of 181 winding-up petitions, against League clubs on 58 occasions, and against non-league clubs on 123 occasions.
- The frequency has varied considerably. There were only two petitions presented in the 1960s, whereas in the peak decade to date, the 1990s, 62 were presented.
(Images can be enlarged by clicking on them)
- A year-by-year plot of petitions since 1990 reveal a more nuanced pattern. After a burst of activity in 2002, HMRC seem to have eased off presenting petitions until taking up the challenge again seriously in 2009, with a greater proportion of League clubs being the object of HMRC’s interest.
- My impression from the list of clubs involved is that there is something of a North/South divide, with a disproportionate number of Southern clubs in the list
- HMRC has complained of ‘serial offenders’ and there is some evidence of this. Bournemouth were on the receiving end of 5 petitions between 1995 and 1997; Chester City received 6 between 1986 and 2009; Crawley Town received 6 between 1973 and 2010; Doncaster Rovers received 4 between 1988 and 1994; Hartlepool United received 7 between 1982 and 1993; Hull City received 6 between 1992 and 2000; Margate received 4 between 2001 and 2010; Northwich Victoria received 4 between 1983 and 2008; Southend United received 4 between 2000 and 2011; and Stockport County received 4 between 1975 and 1999.
Looking at just the list of Winding-Up petitions of course tells only part of the story. The size of the debt to the Tax Man has grown astronomically. When Accrington Stanley withdrew from the Football League in 1962, the club owed the Tax Man roughly £4,500; Portsmouth owed HMRC approximately £11 million when they sought the protection of Administration in 2010. The interesting question is why did HMRC hold back in the period up to 2009 and allow such large debts to grow. It’s not as if they have a track record in the longer term of being tolerant with football clubs.
One petition in the list intrigues me, and I would appreciate any input from readers who know of the circumstances: in 1993 Customs & Excise presented a petition against Gorton and District Sunday League Football Club, and the club was indeed wound up as a result.