Customs men lose appeal over Leeds United insolvency

The League’s Articles of Association, Regulations and Insolvency Policy commonly referred to as the Football Creditors’ rule, seek to ensure the continuation of football clubs that enter administration, the satisfaction of creditors and the settlement in full of all football debts.

Previous challenges by the HM Revenue and Customs were brought after Leeds and Wimbledon went into administration in 2004 and 2007.

Following a five-day trial in November and December 2011, Mr Justice David Richards has ordered the HMRC to pay the costs incurred by The Football League in defending the latest proceedings.

HMRC have been granted permission to take their case to the Court of Appeal.

A Football League spokesman said: “The judgement confirms that The Football League’s rules and insolvency policy do not breach the principles of existing insolvency law.

“We recognise that some regard the application of these rules as being imperfect.

“However, they remain an essential part of football’s approach to handling insolvent clubs within the wider context of competitive league football.

“The judgement recognises that a league has the right to insist upon insolvent clubs meeting their financial obligations to the rest of the game as a condition of continued membership.

“Had this principle been ruled unlawful, the most likely consequence would be insolvent clubs being expelled from The Football League altogether, as clubs would be unwilling to compete against teams that have defaulted on debts to their fellow clubs.

“This would have devastating consequences for the clubs concerned, their supporters and people living in their local community.

“Although it is regrettable that HMRC sought to test this matter before the Courts, we remain committed to a constructive dialogue with the tax authorities as we share the common aim of ensuring that clubs meet their liabilities as and when they fall due, including sums owed to HMRC.

“To this end, The Football League and HMRC have co-operated over the implementation of a monthly PAYE reporting mechanism that has significantly reduced the amount of tax owed by clubs.

“In an ideal world The Football League would never have to apply its insolvency policy at all.

“Therefore, our focus will remain on creating a sustainable business environment for all our member clubs.

“Most recently, this has seen all three divisions of The Football League agreeing to implement cost control measures as part of the League’s Financial Fair Play framework.”