Tax chiefs are calling for a 'more level playing field' when it comes to soccer clubs running into financial trouble.

HM Revenue & Customs says this summer's controversial court ruling in favour of Portsmouth Football Club has once again highlighted the unfairness of the so-called 'Football Creditors' Rule', which it is now trying to fight through wider legal action.

August's High Court judgment meant that Portsmouth FC was free to begin the 2010/11 Championship season after a challenge to its Company Voluntary Agreement (CVA) by HMRC failed.

The taxman had wanted the proposed CVA to be blocked, arguing that it unfairly favoured football creditors over others. There was also an issue over the extent of the alleged tax liability, based on HMRC's assessments.

While the CVA gave Pompey's administrators time to try to settle the club's debts and find new owners, HMRC was left crying foul over what it sees as a serious and industry-wide iniquity.

HMRC submitted that the CVA favoured football-based creditors – including players, who could recover 100% of money owed – over others, such as HMRC itself, meaning that "one class scoops the pool and the rest are left out in the cold".

An HMRC statement afterwards said: "We are naturally disappointed. . . and we can confirm that we do not intend to appeal. Our aim when pursuing debt of any kind is to achieve a fair outcome for the taxpayer and we will take this forward in the wider context of the football industry through separate and outstanding legal proceedings over the status of the so-called 'Football Creditors' Rule'."

More and more soccer clubs in financial crisis are likely to be shown the red card by HRMC, according to Peter Hastings, a Partner at Norwich-based law firm Rogers & Norton, who specialises in insolvency and disputes with HMRC.

Mr Hastings, who has himself acted for football clubs and trusts, says: "It is accepted that football is a unique business and that the 'Football Creditors' Rule' provides preferential treatment to those within sector. So, for example, if a club owes another club some money for programmes or transfer fees, this would take priority over a debt due to a supplier or HMRC.

"We also know that most, if not all, football clubs may be technically insolvent and reliant on the generosity of rich funders. Combined with HMRC's apparent harder attitude to the recovery of unpaid tax, this will no doubt lead to more winding-up petitions against football clubs (and other businesses). We have seen many clubs recently facing the threat of liquidation and seeking alternative forms of recovery – administration and CVAs, for example."

Mr Hastings says: "The Portsmouth case also highlights once again the powers that HMRC has and how it can make an assessment against a business, appoint a provisional liquidator, freeze assets of the directors and in effect shut down a business and deprive the company and its directors of challenging the assessment (which, of course, it did not do with Portsmouth).

"I have acted on a number of cases where HMRC has sought to liquidate a company based on a disputed assessment, and court proceedings have had to been taken to prevent the liquidation, allowing the assessment to be appealed. It seems to be accepted that HMRC is placing a greater emphasis on the recovery of tax.

"I've seen an increase in businesses and individuals who are challenging assessments, detentions and seizures, statutory demands, winding-up and bankruptcy petitions. In addition, I have clients who have made proposals for repayment but are having to set up a CVA or Individual Voluntary Arrangement for such proposals to be accepted by HMRC."

Mr Hastings adds: "There has already been a mixed reaction to Portsmouth's success in its High Court ruling. The passionate football supporter, especially Pompey fans, have clearly been delighted – but is it right that some creditors and the taxpayer suffer in such cases?"

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