Taxing times for football's fritterers
If fans of Portsmouth FC have not acquainted themselves with the recent history of King's Lynn FC they might want to take a crash course now. The seemingly tenuous links between the two clubs are getting painfully close and the next three weeks could decide if they make the ultimate connection.
Non-league King's Lynn became a non-club last month when Her Majesty's Revenues and Custom (HMRC) gained a winding-up order from the High Court. The taxman was tired of IOUs and wanted his unpaid PAYE, NI and VAT - £77,000 of it.
The club, with total debts of more than £200,000, couldn't pay and that was that. 130 years after their formation, the Linnets were no more. It was a cruel end for a relatively well-supported club but it was entirely avoidable.
King's Lynn had been living considerably beyond their means for years. This was compounded by a failure (not entirely their own) to upgrade their stadium. Sound familiar?
It should, because leaving aside all the conspiracy-theory shenanigans of who actually owns the club (and why), Portsmouth's tale is straightforward. You can call it "living the dream" or you can follow Premier League chief executive Richard Scudamore and call it what it really is, "rank bad management".
The South Coast club's myriad problems, on and off the field, have been played out in public for the last six months. Keeping tabs on Pompey has become a blood sport.
The three different owners, the seven straight league defeats to start the campaign, the missing wages, the crippling debts and the withheld TV money - it has been a humiliating experience for a club that was competing with Europe's finest only 14 months ago.
And it could be about to get much, much worse.
On 10 February, Pompey's battle-weary legal team will probably be suiting up for the biggest clash in the club's 112-year history: Portsmouth v HMRC in a sudden-death VAT play-off.
I say probably because there is still a smidgen of hope Pompey can sidestep this rocket. An attempt to have the winding-up petition unwound before it got started was rejected on Wednesday by Justice Newey. But it was clearly not a straightforward decision (he described it as "difficult) as he spent two days listening to Pompey's claims of being overcharged and then another day pondering his verdict.
When that finally came, it was in HMRC's favour but Newey did grant Pompey a seven-day window to appeal. Neumans LLP, the solicitors acting for the club, said any appeal would have "a real prospect of success", although there has been no word of when that appeal will come.
Portsmouth fans should start praying the confidence of their lawyers (and they've got a few) is not just bravado. Reporters following their travails have become accustomed to hearing optimistic noises from the club only to discover the worst-case scenario has actually occurred.
Like almost everything involving the club at present, the details of the case are murky.
The taxman, who doesn't say much, is believed to be chasing almost £11m in missing payments. The club, however, says more than £4m of this has been paid since absentee landlord Ali Al Faraj took control in October and they dispute the rest. They have even suggested the club could be due a small refund.
This may well be true but circumstantial evidence suggests otherwise. The club has fallen behind with transfer payments to at least five different teams and failed to pay its staff on time in three of the last four months (the players are not expecting to see February's wages on schedule either).
In fact, it would be fair to say that being a bit behind with VAT is almost a default (excuse the pun) position for football clubs, particularly those further down the league ladder.
Southend United are a good recent example of this paper-shuffle approach to accounting. It took numerous trips to the High Court to persuade owner Ron Martin to finally write a cheque for £2.1m. He later admitted the club had been guilty, "almost inadvertently", of using the "HMRC Bank as a stop-gap".
Pompey's predicament is so perilous because the taxman is thoroughly fed up with football clubs and is in the mood to make an example of somebody pour encourager les autres. But nobody can say they haven't been warned.
The clubs should have got their houses in order as soon as HMRC lost its preferential status in insolvency cases in The Enterprise Act of 2002. Whereas it had once been at the front of the queue when a company went bust, it was now in the scrum with all the other creditors.
This had enormous implications for the national game because of league rules about paying all football-related debts (wages, transfer fees and so on) first and in full. At a stroke, the HMRC's indulgence of club debt was over, and who could blame it, particularly when faced with the well-intentioned but morally unjustifiable practice of putting footballers first.
This season's spate of tax crises is part of the post-2002 trend but it is also a more acute response to the global downturn and this country's ravaged finances. Every penny counts.
Former star Sol Campbell claims Pompey owes him £1.7m in unpaid image rights and bonus payments
It is ironic that another of Pompey's problems is a lawsuit for unpaid image-rights payments to Sol Campbell. There are many at the Treasury who feel image-rights clauses in contracts are a con to avoid tax, particularly as the cash is usually paid to off-shore accounts. One of the juicy details to emerge from the Manchester United bond prospectus is that HMRC is investigating £5m-worth of these payments at Old Trafford.
Another factor to consider is the timing of Portsmouth's hearing. HMRC knows its transfer windows and clearly feels calling in its debts whilst the indebted have a chance to do something about it is a canny move. Further player sales seem inevitable if Pompey are to avoid the fate of becoming the first Premier League to enter administration.
That, of course, would increase the likelihood of relegation, a Domesday scenario for a club as indebted as the 2008 FA Cup champions. If that happens "doing a Leeds" might be the best Pompey's blameless fans can hope for, as doing a King's Lynn is...well, let's not go there.
We should remember in all this that football is only being asked to do what the vast majority of us do as a matter of course. Former US President Franklin D. Roosevelt once said taxes "are dues we pay for the privileges of membership in an organised society". That is something Pompey, and football, should ponder.