As any one in business knows, when cash becomes a bit scarce, the first people you don’t pay is HMRC. We all know it can take them several weeks, if not months to catch up with you. And let’s face it; PAYE, NI and VAT are usually pretty large bills.
The people you keep paying are wages and utilities. After all, you don’t want to get cut off now do you? And with the change in Business Rates, landlords are more than ready to do a deal now as well. They now have to pay Business Rates even if the property is empty, in case you didn’t know.
And so onto football clubs. There are about 50,000 football clubs in the UK. No more than 6 make a profit. Why do they make a loss? Well that’s darn obvious. Players’ wages. Wages mean tax and NI liabilities become due. Debts quickly mount up.
Now if you stood in the shoes of HMRC, you would want to do everything you can to keep a business going. You will be firm, and as threatening as possible. But that’s because you want your money before the next person in the line. And by keeping the business going, cashflow is maintained – and you want a slice of that please to repay the tax debt.
HMRC, when pushed, will make a business insolvent. Have no doubts about that. I’m pretty sure you may well know someone, or have heard of someone being put out of business by HMRC. But name a football club that HMRC has closed down. Struggling now aren’t you? Well, I am to. They get close with their threats, but there is usually an 11th hour solution.
And that’s the point. Everyone knows this and plays the game to the absolute limit. Why HMRC do not make an example of a club baffles me. Surely it would put fear into the other clubs? And then surely HMRC definitely gets its debt paid. You only need to make one or two examples every 10 years or so. That’s all that is needed. And none of this “Phoenix from the ashes” stuff either. Properly put the club down and disbar its Directors. Stake through the heart stuff.
Of course HMRC already do this. They occasionally put the odd celebrity into jail. They get massive media coverage and it works wonders for the overall debt owed to them. So they know how to do it. But yet they choose to ignore football clubs.
Having spent a few years running the finances of a small non league club, I came across a couple of “odd” stories.
Firstly, my dear friends The FA. I suggested to a compliance officer that The FA should let about 8,000 clubs go bust. This would mean:
- The referee shortage would be solved
- Players wages would reduce – supply and demand kicks in
- Remaining clubs would be more commercially aware
But no. The FA is there to protect clubs. They have specialists that help in negotiating settlements with HMRC. They do not want clubs to go bust. On asking why, the guy look puzzled and was unable to answer.
Secondly a Director of the Southern League proudly told me that they had helped a club out and after lots of negotiation, reduced the £250k HMRC debt down to £30k. As a result, the club had survived. Quick as a flash I pointed out that he had now disadvantaged all the other Southern League clubs. Were the other affiliated clubs having an equal percentage of debt written off so they were all on a level playing field? No? Well, why is one club being treated differently to the others then? The chap was lost for words. He regained his composure and invited me to become a Southern League Director. I declined.
So until football stops acting as a recession proof closed shop, I will remain a fan. And that’s my limit!
And a nice current update on League Clubs was in the Financial Times on 29 January 2010 http://www.ft.com/cms/s/0/7547cf70-0d10-11df-a2dc-00144feabdc0.html
Link to m other football blog: https://smarty09.wordpress.com/2009/09/07/non-league-footy-finances/
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