premier league

Portsmouth Q&A: what will happen to the Premier League club?
What do court proceedings mean for the troubled Premier League club?
What happened in court?

An application from HMRC to have Portsmouth wound up immediately was adjourned for at least 10 days to give the club time to provide evidence that their finances had been restructured, and that they could pay their debts. How much does Portsmouth owe the tax man?

HMRC claim the total outstanding is £12.1million: £7.4million VAT, and £4.7million in unpaid PAYE and NI that has accrued in the past two months. The PAYE was not part of the original petition, but HMRC applied to have it added to a second petition brought by other creditors.

What do the club say?

Portsmouth argue that they do not owe the VAT, which is payable on transfer dealings, and also dispute the total, claiming it is £5.25million. They claim that VAT should not be payable on transfer fees, but lost a challenge to the legislation last month. They have been given leave to appeal and are doing so.

They also claim that they are owed sufficient funds by the Premier League in outstanding broadcast revenue to clear the PAYE, and insist that there are two potential buyers who are in a position to make offers for the club. Neither was named in court.

So why didn’t the court throw out the HMRC case?

Registrar Christine Derrett, hearing the case, shares HMRC’s concern that Portsmouth are trading while insolvent, and wants evidence to the contrary: “It seems to me that there is a very real risk that the company is undoubtedly trading while insolvent,” she said.

HMRC argue that even if Portsmouth win their appeal over VAT, their net position will not have changed as they will have to repay the money to the clubs they received it from. They also still owe £4.6million in PAYE, which HMRC say they cannot pay.

What happens next?

Portsmouth have until next Wednesday to prepare a “statement of affairs”, detailing all their creditors, both current and future, and to explain how they intend to meet their liabilities. HMRC will respond to this new evidence by next Friday, and a hearing before a judge will be scheduled at the first possible date after that.

Could the club go into administration?

Yes. The club’s barrister said that they would examine it as an option, and the judge could force it on them. If they do, the club will be docked nine points and an administrator will be appointed to find a buyer willing to settle the club’s debts or sell off its assets in order to do so.

If the club is wound up its results from the season will be declared void.