Revenue and Customs let rip as football falls apart

The news has just emerged that the Revenue is having a battle with Manchester United over the issue of who pays tax on image rights.  The offer document for the new bond mentions that there might be a legal case over the matter.

It also seem that Man U have difficulty in remembering their own stories.  They had said previously that they could grow because of their rising marketing.  But now they are congratulating themselves on doubling prices over the Glazer years.  And still, no matter how many spins they put on it, most financial analysts seem to find it hard to work out how they can get out of the mire.

As things stand the Revenue might be a minor issue for Man U, not because it is, but because of the size of their other issues.  But this is not the case elsewhere.   Man U’s is just one of a series of cases in which the Revenue is having a bash at football clubs.

The most famous I guess is Portsmouth where they are challenging the previous owner, the previous manager and Peter Storrie whose job title I have currently forgotten.  Court cases start soon.

The Supporters Direct group who particularly have an interest in some of the smaller clubs have noted in a recent email on their news group that Kings Lynn have gone, following a taxman attack, while Rochdale only survived at the last minute, as did Accrington Stanley.  Notts County and Cardiff City are now being threatened.

At the heart of the Revenue’s annoyance with football is the issue of clubs having to pay “football debts” in full if they run into trouble, before they pay off anyone else.   Much was made of this when Leeds United went bust, and paid the likes of St John’s Ambulance and everyone else outside football just 10% or so of everything that was owed.

Deals like that mean that the taxman gets only 10% of what is owed while footballers get their full whack.  So if the Revenue can move on its own before the whole club comes tumbling down, they might manage either by negotiation or through a court order, to get their money in full.

It is possible that the Revenue might even challenge the validity of “football debts first” rule in court.  There is no legal basis for it, and I guess it might be possible for it to be ruled illegal.  That would give football a problem, because it would allow clubs to buy lots of players, go bust, and then only pay 10% of the cost.   Man U might fancy that.

What’s interesting is that there is often something decidedly odd around the clubs that are seriously challenged by the Revenue.  Notts County are a case in point – buying the club for zero, promising the earth, then nothing being as it seemed, then selling the whole thing for £1 with no one knowing who owned the club, and endless oddities involving North Korea of all places.

The only person who comes out of Notts County with any integrity is Sol Campbell who went in, looked, and realised it was all a con, and walked out.  Of course the papers won’t ever give him is due – not least because he was infinitely more intelligent about the affair than they were.  But it would be nice if just one of those sniggering Radio 5 journalists had the decency to apologise.

Another factor in common is the incredulity expressed by everyone who is challenged by the Revenue in football cases.   It is as if they can’t believe what’s going on, and that of course there is nothing wrong.   Maybe the Revenue is run by a bunch of dodos but in the cases they have featured in thus far, this does not look like the case.

The questions we always want answered are:

  • Do you owe the taxman anything?
  • If yes, why haven’t you paid?
  • If no, have you been talking to them about anything recently?

But it is not just tax in this murky world.  As we saw with Notts C ownership can be a difficult business.  We might worry about one of our owners hitting the 30% button and trying a takeover, but if that happened at least we would know who it was.

Notts C have never really found out who owned Qadbak, the firm that promised them the EPL.   As the Guardian has reminded us Qadbak was described by Rothschilds as “a wholly reputable organisation”.  We might giggle a bit now, but we could be giggling even more now we find the same organisation is representing West Ham.

According to the Guardian it was the same Rothschilds that provided the Glazers with the funds to make their purchase of Manchester United.

Now the main American bidder for WHU has gone away, they are left with the ex-owners of Birmingham who don’t seem to want to put up that much money. All a bit sticky three stops from Barking, especially as they have just been found guilty of letting their fans run on the pitch.

What I wonder there is, how could they ever raise a defence?   Millwall fans might sometimes be a bit beyond the pale, but they didn’t go on the pitch.  Only WHU fans did.

So how did the case go?

Judge: You are charged with allowing your fans to go on the pitch.  How do you plead?

WHU: Not guilty

Judge: On the TV footage your fans can be seen on the pitch.  So I ask you did your fans go on the pitch?

WHU: Yes

Judge: Then how can you plead not guilty to the charge of allowing your fans to run on the pitch?

WHU: I’m forever blowing bubbles.

What then of Liverpool? The Liverpool semi-owner (Hicks the elder) said (according to our old friend A Journalist (hic):  “Our debt is very managable and we never use player sales for debt service. Our interest on £200m is about £16m. The new stadium will be the game changer. Christian Purslow is working very hard on it. January is a poor-quality market. The summer window will be big.”

Mr Purslow is the MD and his actual job seems to be searching for new investors – just as Man U are doing the same.  Paying off the banks, paying off some of the semi-owners own debt, buying players and building a stadium seems quite a lot to ask – but they say that they can do it.

It’s a funny old world.

(c) Sir Tony Attwood (my thanks to readers who nominated me for the knighthood, which I accept with deep humility.

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20 Replies to “Revenue and Customs let rip as football falls apart”

  1. LOL.. I tried, i really really tried to read all the way to the end. My apoliogies.. Guess I should leave all the reading to the smart people (runs in a circle and cries)

  2. I must say that in my country the taxman always comes first and it is the rest that gets the crumbs that fall from the table.

  3. Makes u appreciate how well our club is run and that steps are being taken to ensure financial safty in the future. Can’t wait for the death of manchester united

  4. I’ve heard rumours that manU are considering selling their training ground. Is their financial situation really that dire?

  5. Those Clubs (Didn’t they call them “too big to sneeze”?) think that the world revolves around them. They behave like spoilt brats, especially ManU, parading themselves like giant peacocks, spending like there is no tomorrow. Well, maybe it never occured to them that if ordinary men and women who earn peanuts could pay tax, they too should endeavour to pay promptly; or they actually foolishly think that they are “too big to pay” and can make a mockery of the Revenue & Customs pumpkins.

    What goes around comes around.

  6. Cujo – you can read about the Man U training ground story here

    There doesn’t appear to be a plan to sell the ground – yet! The idea is that Carrington (the training ground) may be transferred to another company owned by the Glazer family. This will mean Carrington is not part of the security for the bonds they’re are proposing to sell, information they had to include in the bond prospectus.

    In the short term it just means that if they want, the Glazers can lease Carrington back to Man U on any terms they feel like, ie charge whatever rent they want and with whatever conditions they feel like, because right now the agreement would be made with no possibility of dispute. If they do charge rent, they can immediately start to take even more money out of the club.

    In the future they could sub-divide Carrington and re-let or even sell parts of it. They could sell the club but not the ground or vice versa. If there are existing planning consents for change-of-use even small parts of Carrington could prove very attractive to developers and the football club would no say in the matter and would get none of the proceeds.

    The underlying issue is that companies don’t do things like this for fun. It costs money to do it so the Glazers wouldn’t be doing it if there wasn’t an idea to make more money down the track.

    That’s enough about Man U for an Arsenal site!

  7. The Man Utd bond prospectus is a gold mine for anyone interested in football finance. Any company trying to raise money in this way is forced to set out all known issues which may affect the security of the investment.

    This is why we now know that there is a dispute with the Revenue about players’ image rights (who knew you could get anything for Ferdinand’s or Rooney’s images?).

    We know that there is a plan to hive off the training ground to a new Glazer company separate from the club.

    A third gem is the identification of a threat in the possibility that UEFA may legislate to force clubs to operate within their means. Man Utd know that this could hit them just as much as say Portsmouth at one end of the scale or Chelsea & Man City at the other.

    If UEFA decides that clubs must a) prove they are paying their bills and b) not allow expenditure to exceed income generated from football by more than a small percentage then a lot of clubs will be in trouble. No more borrowing just to pay the wages, never mind the transfer fees. Better still, no more unlimited cash injections from sugar-daddies.

    Bring it on I say. Clubs will have to build to succeed and not buy it. Whether they’re buying it, or rather trying to buy it, with borrowed money or gifts of gas & oil money it’s all financial doping.

  8. Like it is said many times in the Arsenal museum: We(The Arsenal) do it our way. And I hope we continue to do so for many, many and many years.

    I really think that I would almost laugh my self to death if MU would do a Leeds. And Liverpool.

    If you then see at the wealth we have in our youth coming througd and the youth in our first team with an average age of some 22 years…

    All thanks to the manager and the board for keeping us in a good financial health.

  9. There are 2 ManU supporters in the office where I work and the other day during a general conversation about the transfer window and signings I commented that in 10 – 15 years time the Glazers would have turned ManU into a mid table team (I was sugar coating it massively) and got laughed at. A couple of days later ManU announce their latest figures, shock horror with out the Ronaldo sale they would have made a huge loss. I repeat my comment and the reply “Yeah well the same will happen if Arsenal get bought out”.

    How is it that other wise intelligent people find it so hard to grasp simple facts? Arsenal have a debt about half the size of ManU’s, ManU’s turnover is what £10 – £20 million more than ours (I’m knocking off the money from the property sales from out last set of accounts). So why according to the masses can ManU afford their debt yet Arsenal are broke?

  10. Marc, I think that some football fans when they speak about their team some part of the brain get switched off. I think one could say they just want to see and believe what they want to see or believe and even when their nose is rubbed in the mud, they still refuse to see that they have a dirty nose.
    I think this goes for a lot of football fans whatever team they support.

  11. Sir Tony, this is getting very fascinating by the day. Is this going to be the same as the financial melt down we have around the world where no one knows the actual solution? My assumption was that the Glazer’s bought ManU to turn around and sell for quick profit, specially considering they borrowed some of the money from a hedge fund. Hedge funds charge higher interest rates and want their money back faster than, say banks. If I remember this right, ManU was valued at $1bn a while back. So Glazer’s, being business men, thought they would buy low now and sell high later. But, later is supposed to be now where the value has gone down because of the financial climate we are in. I remember them unconvincingly claiming to be for the long howl when the fans complained at the time. These people are not stupid, but may have miscalculated the timing. Can they possibly sell ManU for some one in another planet for profit? This maneuvering really looks more like plan B and C.

  12. As a friend of mine recently said “we are in a financial armegeddon” Alot of these clubs have been robbing Peter to pay Paul since the inception of the Premier League. As in my post the other day many of these ‘Big Clubs’ Chelsea, Man U , Liverpool, Spurs and if not already Man City are either running at operating losses or with profits barely covering their interest payments meaning overheads will produce losses. Whilst they can mask these realities with the sales of top players, this clearly cannot be used indefinitely. A very interesting article Tony, I am keen to see if the Revenue will actually bare teeth and bite one of these ‘big’ clubs

  13. Wasn’t there a certain manager, whom according to some “fans” has lost touch of reality, that has been warning for some time now that the football world is going to get hit hard by the economical and financial crisis ? I think he has told this since the first banks went bankrupt almost 1,5 year ago and once again… he was right.

    If I hadn’t met you in person I would think you are Arsene Wenger, Tony.

  14. Cheers for the namecheck for Supporters Direct. We also have a huge interest in the top two divisions of English football – Arsenal Supporters Trust, Man Utd Supporters Trust, Spurs Trust, Portsmouth Supporters Trust, Newcastle United Supporters Trust, amongst others.

    On the Football Creditor Rule, Inland Revenue (as was – now part of HMRC, obv) challenged the rule twice in the courts, challenging Wimbledon Football Club Limited (the franchise as many know them), and Exeter City (after they were taken over in massive debt by their supporters’ trust), but they failed. The Football League, but I’m not sure about the Premier League, have now introduced monitoring of tax-payments, however they are more just monitoring protocols with few real teeth at this stage; it seems the worst that could really happen in the rules is a transfer embargo.

  15. Very interesting article (as usual) Sir Tony! I was wondering though, what are your thoughts on the implications the decline of Manchester United would have on the Arsenal, and subsequently the EPL. Seeing as the ManU – Arsenal rivalry is what got me hooked on the EPL in the first place, and isn’t because of Arsenal’s rivalry with the other big 4 that Wenger invested so heavily in project youth in the first place (of which we are now starting to reap the benefits). Competition inspires innovation. Wouldn’t the decline of the main clubs, who are having financial trouble as of late (Manchester United and Liverpool), see the world’s best players (young and old alike) head to greener pastures in other leagues and make for a rather boring and stagnant league?

  16. Rafael – I don’t see it this way. For a number of years we had a Big Two, where Arsenal and Man U alternated between first and second, and notion of a big four is recent.

    I think that as clubs with a false economic model slide down others will rise up. Any decent side could “do a Wenger” if only they could find the right manager and have faith in him. That is what the board at Arsenal did, and he turned us around very quickly, and then set out changing everything in the club.

    There will be clubs who will do that, and then we will have two models – the Richkid model of Chelsea / Man C and the sustainable model of Arsenal. Everton could do it. Villa could do it. They just need the right manager.

  17. LOL Benhan really LOL. So yes he could come out innocent but where there is smoke… there is a fire somewhere…

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