The taxman has named the Premier League as the defendant in the case which could change the way the football business runs.
A spokesman for HMRC said:-
“There is no legal basis for the football creditor rule. Non-football creditors are being seriously short-changed and enough is enough.”
The Premier League, however, has said it will ‘vigorously defend’ its position.
HMRC are reported to have become annoyed at a number of club insolvencies along with the Premier League’s first ever insolvency at Portsmouth.
This is not the first time however that HMRC have attempted to take action against this rule.
In 2004, HMRC took action against Wimbledon in the High Court after they were only given 30p per £1 in relation to a £525,000 debt the club had run up.
The complaint was that the football creditors rule allowed football participants to receive full compensation whereas non-football creditors received nothing.
Although HMRC lost the case, their stance on the rule has not changed.
The Premier League are expected to argue that when failed clubs are forced to honour debts to competitor clubs, the money stays within the industry and therefore contains the problem.
If this were no longer the case, there are worries that this would lead to more insolvencies than rescues and therefore leaving creditors such as HMRC with even less.
According to reports, senior player representatives have admitted they are embarrassed about the rule that protects footballers over small businesses such as St John’s Ambulance.
If HMRC manage to successfully challenge this rule it would be a major benefit to them but how sure are we that all money would not just go to HMRC rather than actually helping smaller local companies.
This could be a purely selfish act by HMRC.
