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Premier League and Football League issued writ by taxman to oveturn creditors rule
Published : 02 Jun 2010 16:37:47
Her Majesty's Revenue and Customs issued a writ against both the professional leagues in mid-May and sources said they 'will go the whole hog' to try an overturn the rule. Under the rule, enshrined in the regulations of both leagues, in the event of an insolvency all 'football' debts have to be settled before unsecured creditors including HMRC. Related ArticlesWest Ham set to name new managerArsenal reject £29m Fabregas offerAshley Cole on Mourinho's radarRed Knights vow to fight onRedknapp: Cole Spurs move unlikelySport on televisionThe issue arose most recently at Portsmouth where HMRC is likely to have to settle for 20 per cent of the £17 million it claims to be owed while players and clubs are paid in full. Portsmouth owes around £22 million in outstanding transfer fees and other debts to clubs, and under the football creditor rule the Premier League will pay them directly out of parachute payments owed over the next two years. HMRC believes the rule to be fundamentally unfair and the legal action comes after months of growing frustration over the issue. 'We believe the football creditors' rule is fundamentally unfair to HMRC and other creditors and we will be going the whole hog to try and overturn it,' said a source. 'UK taxpayers should not be put at a disadvantage compared to football and we are taking this step to try and protect the integrity of the tax system.' HMRC previously challenged the football creditors rule in 2004 as part of a case involving Wimbledon, but that attempt failed because of the peculiarities of the case. The writ issued last month is understood to be a more generalised and concerted attempt to tackle the issue. No date for a court hearing has yet been set. The issue may yet prove divisive in the game, as the Premier League has been more open minded about ditching the rule than the Football League. Insolvency is far more common in the lower leagues and the rule is it is seen as a vital defence for clubs left out-of-pocket by failing competitors. Neither league was unavailable for comment at the time of writing.