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Football creditors' outcome set for Spring 2012 8 December 2011

HMRC and the Football League (FL) both put forward their arguments during the five-day case which dissected one of football’s most divisive topics.

And the contest is expected to be settled by late February or March once the detailed evidence is analysed.

The tax man is challenging the FL’s current system which gives preferential treatment to football creditors when clubs succumb to administration.

It means other unsecured creditors, such as HMRC and businesses outside of the game, are left to pick up the remnants of monies recovered after football creditors have been paid in full.

In court, Gregory Mitchell, QC, for HMRC, described the football creditors’ rule as the "ugly side of the beautiful game".

Arguing why it should be scrapped he explained: "Insolvency is a very real hazard in the football league.

"As a result of the operation of the (football creditor) rule all of the football creditors are paid in full while others who are unsecured receive, if they’re lucky, a small dividend if nothing at all.

"We say these rules are contrary to the fundamental principles of insolvency laws and are void.

"Football clubs are substantial businesses – when a football club becomes insolvent there is a long list of businesses whose interests are prejudiced by the rules."

Mitchell also added there had been 36 football insolvencies since 2002, the FL effectively argues the current arrangement is designed to give protection to financially well-managed clubs against the risk of other sides being unable to meet their financial obligations.

It insists the system is necessary to protect the integrity of its competitions in circumstances where clubs, not only play against each other, but also conduct business.

A spokesman for HMRC said: "We are satisfied that the whole issue of the football creditors’ rule has been fully aired in court."

The FL declined to comment.

 

By Andy Pearce

 

 

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