Portsmouth Defeat HMRC in Landmark Legal Case

As I mentioned in an earlier blog, the reason most football clubs are facing financial difficulties is simple: their expenses exceed their income.

Portsmouth FC are no exception and currently facing an uphill struggle to remain solvent.

However, their battle became a little easier earlier this month after a high court judge rejected claims by HM Revenue and Customs that a CVA agreement drawn up to settle the former Premiership club’s debts was ‘unfair’.

HMRC had argued the CVA was ‘completely flawed’ because under its terms players and other alleged preferential creditors would receive 100pc of monies owed to them, while the taxman and other creditors would only receive 20pc.

In the increasingly complex world of English, football creditors such as players, managers and coaches are considered preferential creditors and can therefore be ranked above all unsecured creditors, including HMRC.

However, as there is no law defining exactly what a footballer creditor is, so the HMRC were clearly using this as a test case to establish a precedent and get clarity once and for all.

The judgement will do much to inspire Portsmouth FC’s board of directors who face the unenviable task of trying to keep their business afloat for another season.

To boost your confidence in administration and insolvency related issues call Insolvency and Law now on 020 7504 1300.

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