Tax, Transparency and Ipswich Town

Bolton Wanderers was not the only club facing bankruptcy in Court on Monday. Ipswich Town were also on the court list.

The Managing director of Ipswich, Ian Milne (Registered address Ireland’s International Finance Centre) took to the airwaves to reassure the supporters. This was simply a mixup with a ‘service provider’. There was confusion over an invoice, and the supplier’s system automatically issued a winding up petition to the High Court even though club had agreed to pay a bill. The club had to go to court to cancel the petition, the issue was a “storm in a teacup”.

Except, unfortunately Ian was not being entirely honest with listeners of Suffolk radio. In court, when the barrister for Ipswich Town stood up to ask for the winding up order to be dismissed, it was the representative of HMRC, the tax collectors, who accepted the request.

The winding up petition was not issued by a supplier, but appears to have arisen out of a tax dispute.

Neither does it appear that this was the result of an automatic computer glitch by the “the supplier”. We asked HMRC about why they decide to pursue a winding up order. They stressed that they could not talk about any specific case, and could only tell us how they dealt with cases in general.

Liquid football

HMRC seeks a winding up order when a company owes it money. A winding up order means that the company is shut down, its assets are frozen and then sold in order to pay off any debts it has. That process of selling off the assets is called liquidation. Liquidation is pursued if a company is not paying a tax bill and if HMRC think that this is the best way to recover the debt (i.e. they will continue to refuse to pay or can’t pay because they are insolvent).

If a company has a good history of paying their bills on time and they are having difficulty they will give the company time to pay rather than attempt to shut down the company.

HMRC confirmed that there is no automatic process by which it issues a winding up order to the High Court. Each case is considered on a case by case basis and the application is made on paper.

Storm in a Tea Cup?

All this rather suggests that the problem was a little more than a misunderstanding.

We put this to Ipswich Town. The club insisted that the although the bill was in fact from HMRC and not a supplier, there had been an agreement to pay the bill in January. That agreement had been made before the winding up petition had been issued and was paid as agreed, the winding up petition was duly dismissed and should never have been issued in the first place. It was a mistake and a non-issue. The club is in no financial difficulty.

So was this a cock up by HMRC? Or a sign of a club in financial difficulty? Of course, accidents do happen, and bureaucracies are more than capable of incompetence. However, the trouble in this case, and indeed all cases involving HMRC, is that it is impossible to confirm what actually happened.

HMRC is under a legal obligation not to discuss any identifiable taxpayer. So if Ipswich are wrong, and this was not the result of a mistake by HMRC, then HMRC are completely unable to defend themselves. We are entirely reliant on Ipswich’s account of events - and they have already been less than forthcoming.

Indeed the club made no public statement whatsoever before some of their eagle eyed fans spotted their team on the court list. A study of the recently published accounts for Ipswich Town FC, which was signed off by Ian Milne when he was in Ipswich on January 8th, makes no mention of the fact that a winding up petition had been issued against the club.

A similar issue has recently arisen with another company, Google. Google announced that it had come to a deal with the government over 10 years worth of tax. Its tax bill had been adjusted by £130m. The Chancellor was ecstatic, tweeting from a luxury Swiss ski resort about the great victory for the Treasury. When we started to point out that £130m over 10 years was actually not that much for a company that was generating billions in sales and profits from the UK, questions started to be asked.

How had HMRC arrived at such a paltry sum? Why had Google not paid more? Was this yet another sweetheart deal from the government to appease a big company. Yet HMRC could say little due to their legal duty of confidentiality, the public were left in the dark, and HMRC looked bad.

The need for transparency

Clearly the system has become slightly absurd. There is little argument as to why a company should have a right of confidentiality in their tax affairs, which by its nature is a public obligation. The public have a right to know about the deals made between their government and companies over the money to provide public services. People should also be able to know about the nature of tax disputes, particularly when that dispute has reached the point where the government is seeking to close down a company. After-all, companies and football clubs in particular impact more people than simply their directors and shareholders.

Surely the right thing to do would be publish corporate tax returns for all companies. That way people could google what is really going down in Ipswich Town.

Until then, Ipswich fans may wish to consider to what extent the following imply a risk to their club:

  • The financial secrecy currently baked in to the club’s structure;
  • The fact that HMRC issued a winding up order against the club for non-payment of tax; and
  • The club’s decision to misrepresent this publicly, and not to mention it in the accounts.

Only one of these, at the most, could be due to a mistake by HMRC.

Picture Credit Matthew Baron from Flickr 


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