Wednesday, July 04, 2007

Taxing Times Ahead For Leeds

The demise of Leeds United has been so prolonged and painful that most have stopped paying attention. Three years since their relegation from the Premiership, the club's plight is now so grave that their fans will greet the start of the club's Coca Cola League One program with relief, rather than despondency, for it will mean that Leeds have survived a precarious summer.

Shortly after their relegation from the Championship was all but confirmed, the directors of Leeds United placed the club into administration, thus incurring the Football League's ten point penalty and ensuring demotion. By going into administration, the club's chairman, Ken Bates, ensured that their £35 million worth of debts could be effectively wiped out.

With the agreement of 75% of the club's creditors, Leeds could then be sold to a new company, Leeds United Football Club Limited (one of the major directors of which is, of course, Ken Bates) via a CVA (Creditors Voluntary Agreement).

The fact that Bates himself was one of the club's major creditors, allied to his offer to pay off 1p in the pound of all debts owed to creditors, helped the sale proposal win the approval of 75.2% of the creditors at a meeting in May. Aside from the small creditors who would lose out (the majority of the funds were owed to Forward Sports Fund, of which Bates was a part), the other major loser in this deal was the Inland Revenue, which was owed £7 million in unpaid taxes. Her Majesty's tax collectors, however, were not quite so enamoured of Bates' plan.

Despite Bates raising his offer to creditors to 8p in the pound, the Inland Revenue announced yesterday that it would be launching a legal challenge to the CVA, therefore stopping the proposed sale until such time as the court case is resolved. The club's administrators, KPMG, will remain in control until then. However, should the courts rule that the club cannot be sold under the terms of the current proposal, and no alternative buyer can be found to make satisfactory reparations of the debts, then it is possible that Leeds United will be forced into liquidation.

As English football's top flight begins the first course of the lavish banquet served courtesy of the new Premiership television rights deals, Leeds' plight seems already to belong to another age. The brief interlude of financial caution that chilled the football world earlier this decade, as it became apparent that clubs could simply not borrow and spend endlessly, has given way to a new fiscal reality. For the top English clubs at least, it seems no longer necessary to have to speculate in order to accumulate: thanks to TV money, most have accumulated plenty before before a ball is even kicked.

Leeds' story now resembles the cautionary tales often told against pyramid schemes or bull share markets. Just at the time when it seems as if everyone is a winner, there usually has to be a loser. Of course, while the massive sums received by Premiership clubs from next season appear to provide insulation against cash flow problems, who would be surprised if the forthcoming seasons throw up another Leeds, a club which borrows on the basis of future good times which prove illusory?

The status of Leeds as the forgotten club of the Premiership's first boom-time might have a little to do with the fact that the club were always likely to be unlamented, given their general unpopularity with supporters of other teams. In fact, many supporters have expressed themselves positively chuffed at the idea that the Yorkshire giants might go to the wall, an extraordinary sentiment given that the club in question are one of English football's major outfits.

But perhaps the lack of attention on Leeds' travails is more akin to a case of a group of wealthy diners, who, when seeing a pauperised former member of their number outside in the cold, turn their faces away and change the subject.

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3 Comments:

Anonymous Anonymous said...

SUPERB COMMENTS SIR..

WE WILL BE BACK.....

10:29 p.m.  
Anonymous Ricky said...

Your last paragraph reminds me of that imfamous scene in Trading Places, poor old Louis Winthrop III out in the cold and rain, dressed as a drunken santa, eating smoked salmon through his fake santa’s beard, with Billy Ray Valentine dining inside, with his friends, wearing his Harvard Tie… “Can you believe it? My Harvard tie. Like oh, sure he went to Harvard”...

Oh yeah, forgot... poor Leeds...

3:01 a.m.  
Blogger Tommy77 said...

Ricky, subconsciously I may have been thinking of it too...

4:06 p.m.  

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