Serendipity

Wednesday, March 01, 2017

Here's an idea...

I was reading about Leyton Orient’s current financial difficulties earlier. In case you don’t know it’s yet another variant of the uncaring/incompetent/asset-stripping owner running up an unpaid tax bill (the case is yet to go to court but I am assuming it is income tax related) and HMRC issuing a winding-up order. Usually the winding-up order gets dodged in some way often with the club then being forced into administration during which somebody will put up a token sum of cash in lieu of none at all for the unsecured creditors (of which HMRC is one) at which stage there is a vote the result of which, usually, is to accept the offer because nobody, HMRC apart, wants to see a club fold and vanish.

I don’t really want to focus too much on Leyton Orient; I realise their plight is more complicated than I have suggested above and I’ll leave the detailed ins and outs of it all to their fans to describe but when my club, Plymouth Argyle, went through this process £100,000 was on the table. The unsecured creditors accepted this in place of the approximate £9m they were owed in total, some fees were deducted from the £100,000 and they ended getting paid 0.022% (yes – far less than one quarter of a of one tenth of one percent!) of the sum owed on a pro rata basis. So basically if your debt is unsecured then you’ve more or less had it.

There is something about this that really sticks in my craw. Everything about it sucks. At a stroke the club gets away with running up huge debts that it had long since known was unpayable. Effectively for a while before push comes to shove the club has been trading when insolvent, which is illegal, but nobody is ever brought to account and it is always the creditors that get stiffed. HMRC has been on the wrong end of this lots of times and over the years I’d hate to know how much due tax has been written off – it must be hundreds of mi££ions. HMRC knows though and HMRC hates it and HMRC wants to nail a football club to the mast as a warning to others but has so far not managed to get their trophy (although they went hellishly close to getting Argyle). Maybe they’ll end up with a Leyton Orient-shaped trophy this time. I hope not because I don’t want to see any team fold but I don’t blame them for trying.

The thing here is that HMRC is acting entirely properly. Everybody should pay their tax. I pay mine. Chances are the readers of this will pay theirs. Why should “Football” be any different and not cough up – there’s more than enough money in football after all? And this is not a victimless crime; schools get closed, hospitals are short-staffed, roads are less maintained and God knows what else is affected as a result. This is a very real and very big problem not least because it means either I, along with everybody else, pay more tax than I need to or get services worse than those I have paid for.
In League 2, where both Leyton Orient and Plymouth Argyle currently ply their trade, the clubs all have to meet the atrociously named Salary Cap Management Protocol (SCMP). In short the money available for team wages must be no more than 55% of income. The Football League monitors this and, so far as I know, nobody has ever been caught flaunting the rule.

This means that clubs have to project income and budget, on paper at least, accordingly meaning that the actual figures involved are known well in advance by both clubs, although it may vary wildly for each, and Football League.

So here’s my idea… At the beginning of each season clubs should pay in advance a sum of money, call it a “bond”, in order to be granted their Golden Share which in turn allows access to League and cup competitions. No Bond = No Golden Share = Nobody to play.
I’m going to make up some numbers now for a fictitious club to illustrate how this might work. If their 55% amounts to £1m then the income tax on that would be about 40% so they would need to put £400,000 into their Bond which the FL would then hold in Trust. No matter what happens to the club over the course of a season it’s tax bill would already effectively be paid. There would never be a mid-season HMRC winding-up order again and Football would not be able to dodge paying its taxes.

Obviously the clubs won’t like this. “Where the hell do we get £400,000 to pay for this?” they’ll say. So bring it in in increments over the next 10 years. Make that club pay £40,000 this time, £80,000 the next and so on. To put that in perspective the initial payment of £40,000 would be covered by the sale of the first 150 or so season tickets at most clubs which would be easily affordable if known well in advance.

This would mean the Football League would be holding a rather substantial sum of money on behalf of the clubs/HMRC (depending on how you look at it) which could be invested to generate an income which could go towards the next year’s Bond or be ploughed back into the game in some way.


And instead of Football being a venal, self-obsessed tax-dodging bastard of an industry it could hold its head high and proclaim proudly that it pays its taxes, that its league structure is financially sound, that the chaos caused by the mid-season liquidation of a club would be avoided and proud old clubs like Leyton Orient and Plymouth Argyle would be confident that their future was assured.

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