Portsmouth’s parlous progress
Posted by John Beech on May 7, 2010
I guess yesterday was a good day to bury news on, what with the no small matter of a General Election. It was, by I’m sure complete coincidence, the day of the first meeting between Portsmouth’s Administrators (there mob-handed rather than the usual solo appearance of Andrew Andronikou) and the club’s creditors to discuss a CVA proposal. Press reporters were banned from reporting the meeting verbatim (but, on a big plus side, were allowed to attend), and we should be grateful to Nick Szczepanik of The Times and Matt Slater of the BBC who considerably enlivened a dreary afternoon with their tweeting.
As a seasoned Pompey observer, it of course came as no surprise to learn that debts had grown again, now to £138m (1). Equally predictably, there were surprises in the detail.
An extra debt of £17m to HMRC has emerged. The figure consists of not only an unsurprising amount of interest charges, but also claims for tax liable on payments to players for image rights. The latter opens a whole new war front by HMRC, attempting to move this practice which is widespread in the football sector from the realms of tax avoidance, which is perfectly legal, to those of tax evasion, which is not. If this claim is successful, it will have profound implications for clubs from the Premier League down to League 2, where newly-promoted Notts County have not been able to hide the practice with respect to Sol Campbell, albeit rather briefly at the start of the current season (2).
Even by Pompey’s surreal standards, the most extraordinary new debt is a claim for £50m from the Football League Pension Fund. Seemed frankly incredible, as Portsmouth last played in the Football League in season 2002/03 and their wages bill for that season was less than £14m. This pension fund is in fact for non-playing employees, which would make the figure of £50m even more ludicrous even allowing for Peter Storrie’s salary. Andrew Andronikou has suggested that the actual figure is in fact a rather more modest £34,000 (3).
The proposed minimum payment of 20p in the £ over five years looks likely to be accepted formally, but HMRC have managed to negotiate at least one key condition. The current club is to be liquidated within nine months (doubtless triggering an investigation into how it was run) and the CVA transferred to a new company (4). This scenario assumes that a new owner has emerged by then, and the formal acceptance of a CVA makes this more likely.
One crumb of comfort to emerge is that Balran Chainrai has agreed to personally pay off in full debts to charities and to all creditors owed less than £2,500 (5) as a goodwill gesture. These include British Gas, BT, Dairy Crest, Holiday Inn, Jobsite, Mercedes Benz,and Qatar Airways (who are owed 20p apparently) as well as a number of local small businesses. It also excludes local businesses owed more than £25,000 of course.
Andrew Andronikou has set a harsh but realistic (for a Championship club) wages cap for next season of £10,000 in total per week (6). His stark message to players is “Like it or lump it“. Any notion of ‘bouncing back’ seems increasingly to be in cloud cuckoo land. A bit like the country in post-election ‘hung parliament’ mode really.
Not altogether surprisingly, The Independent on Sunday is reporting that Portsmouth are to challenge HMRC’s claim regarding image rights (A) in what will be a very important test case with potentially major ramifications for many, many clubs. The same report suggests that a secvret deal is being negotiated between the Administrator and the so-far unsympathetic Premier League. One to watch…
Offshore payments to players is the thrust of a new initiative by HMRC it would seem. Glasgow Rangers are are reported (B) to have been hit with a tax bill which includes £24m for such payments made in the last decade.