FIRST IN THE QUEUE ?
At a hearing in the High Court last Friday, Mr. Justice David Richards dismissed the latest attempt by HM Revenue and Customs (HMRC) to have the so-called 'Football Creditors' rule declared unlawful. In simple terms, the rule ensures that, if and when football clubs become insolvent and go into administration, then the club`s players are assured of their wages being paid in full and any debts to other clubs being honoured whereas other creditors may get only a small fraction of what they are owed. These other debts often include tax and VAT liabilities, small local businesses, public authorities and local charities.
There have, of course, been recent examples of clubs becoming insolvent and going into administration and not surprisingly HMRC has been pursuing their legal challenge against the rule which sees the very high salaries of players paid in full whilst only a tiny fraction of the tax owing on those salaries has been paid. Also unsurprisingly, whilst the Judge said that the rule does not break current insolvency law, he referred to it as having been "subject to a good deal of criticism" and that "the Football League (whose rule it is) should not regard the result of this case as an endorsement of its approach to football creditors."
The result is, however, that the Football League are over the moon, leaving the small creditors as sick as parrots and all the while the players, with their often offensive salaries, continue to find themselves first in the queue when a club becomes insolvent. The ongoing basket case of Portsmouth FC has highlighted the difference between their highest paid players such as Tal Ben Haim reportedly on £36,000 a week being paid whereas the local florist, the local scouts, the St. John Ambulance and local charities are still owed money.
But the cavalry might be on the hill in the form of Damian Collins MP who proposes to introduce a Bill in Parliament to make the Football Creditors rule illegal. One of the principles behind insolvency should surely be that all creditors are treated equally, so I wish him well. I suspect we may have a long wait though, what with Parliament not sitting very much and anything to do with the law taking ages to settle.
There have, of course, been recent examples of clubs becoming insolvent and going into administration and not surprisingly HMRC has been pursuing their legal challenge against the rule which sees the very high salaries of players paid in full whilst only a tiny fraction of the tax owing on those salaries has been paid. Also unsurprisingly, whilst the Judge said that the rule does not break current insolvency law, he referred to it as having been "subject to a good deal of criticism" and that "the Football League (whose rule it is) should not regard the result of this case as an endorsement of its approach to football creditors."
The result is, however, that the Football League are over the moon, leaving the small creditors as sick as parrots and all the while the players, with their often offensive salaries, continue to find themselves first in the queue when a club becomes insolvent. The ongoing basket case of Portsmouth FC has highlighted the difference between their highest paid players such as Tal Ben Haim reportedly on £36,000 a week being paid whereas the local florist, the local scouts, the St. John Ambulance and local charities are still owed money.
But the cavalry might be on the hill in the form of Damian Collins MP who proposes to introduce a Bill in Parliament to make the Football Creditors rule illegal. One of the principles behind insolvency should surely be that all creditors are treated equally, so I wish him well. I suspect we may have a long wait though, what with Parliament not sitting very much and anything to do with the law taking ages to settle.
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