By Daniel Hunter
A new analysis of Premier League football club finances reveals that players’ wages are often more than 100% of turnover.
A report in the April edition of Accountancy magazine, published by tax and accountancy information company CCH, part of Wolters Kluwer, exposes the parlous state of British football finances.
Very few British clubs are profitable, Arsenal one of them. TV rights, property deals and other income-generating vehicles are often not enough to provide the cash to improve a club’s financial performance due to the intense pressure from fans and the media to spend money.
Clubs often look to the banks to fund this spending but the risk is that the bank can refuse to lend any more, Accountancy reports: “Arsenal manager Arsène Wenger is keen to maintain his strict wage structure, which has resulted in the club losing top players (albeit often at a handsome profit) because wages are often far lower than other clubs.
“If Arsenal’s fiscal prudence knocks the club off its position as one of the Big Four, then, while they have a healthy balance sheet, going for so long without winning trophies may well lead to a dearth of talented players and threaten the club’s standing.”
Pompey and tax circumstance
Premier League teams tend to owe most of their money to banks and not so much to the taxman, but it is not unusual for clubs in the Championship and below to fall into difficulties over amounts owed to HMRC. Portsmouth FC missed two PAYE payments of £800,000; although it has secured finance from the Football League to finish the season, it has around £40M of debt, of which only about £2M is tax debt, Accountancy magazine reports.
However, unpaid tax on players’ salaries has dogged a number of clubs, with a £110,000 weekly wage regarded as a modest amount for a top-flight club. Accountancy magazine says: “Portsmouth is not the only high-profile club going into administration over debts to HMRC: Rangers FC in the Scottish Premier League appointed administrators in the same month. HMRC has taken Rangers to court over a reported £49M of unpaid tax on monies paid by the club to players through Employee Benefit Trusts (EBTs), which in the light of HMRC’s clampdown on disguised remuneration was to be expected.
“The EBT decision is still to be made by the Tribunal, but we believe Rangers has been advised that it has lost the case. The tax bill, plus interest and penalties, reportedly could end up being anything between £30M and £50M. Already the club has had to renegotiate player contracts to slash wage costs and make redundancies, and there is talk that the club could sell as many as 11 players.”
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