EFL planning to lift sanctions against clubs that don't pay tax bills

EXCLUSIVE: EFL to lift sanctions against clubs that don’t pay their tax bills as debts to taxman spiral to £78m amid Covid-19 crisis and League puts pressure on the Government to find a solution to growing financial chaos

  • Up to 20 clubs are on the brink of financial collapse due to the Covid pandemic
  • Clubs that default on payments to the taxman are placed under a transfer embargo, but EFL is planning to change rules to give clubs more breathing space
  • EFL wants government to find ‘sustainable’ solution to the financial crisis
  • Premier League offer of £30m in loans and £20m in grants is ‘far from’ enough 

The EFL is dropping sanctions against teams that don’t pay their tax bills as it tries to protect clubs from the growing financial crisis and turns up the heat on the Government to help.

Currently the League assists the taxman in gathering payments by threatening clubs with a transfer embargo if they do not pay up on time and a points reduction if they go into administration.

However, Sportsmail understands the transfer embargo is set to be lifted.

And clubs are pushing for the points reduction to be scrapped, too, if they are forced into administration for unpaid tax debts.

EFL is planning to lift sanctions on clubs that default on tax bills as financial crisis deepens

The EFL has become increasingly frustrated with Culture Secretary Oliver Dowden’s refusal to consider emergency funding for football in the same way he has done for the arts, which have received £1.5 billion of support due to the financial devastation caused by the Covid-19 pandemic.

Clubs insist they want a constructive discussion with the Government, not only about emergency funding, but also increasing tax debts.

EFL clubs argue that it is unfair for government policy to ban fans in grounds, crippling them financially, while refusing to offer assistance and at the same time demanding tax payments that teams cannot meet.

‘The maths do not add up,’ said one club insider. ‘We are forbidden from getting revenue because we cannot have fans, but they are demanding we pay. There will be a gap.’

Some EFL clubs want the 12-point deduction imposed for administration to be removed; Oldham Athletic (above) are just one club to have been in financial trouble this year

EFL supports HMRC gathering taxation by threatening clubs with embargoes if they don’t pay

The Government revealed in October that the unpaid tax bill of EFL clubs had reached £77.6million.

‘Oliver Dowden is saying “this is not my problem”, but what the EFL is doing is a way of saying “actually it is your problem”,’ added the inside source.

‘It’s time for Mr Dowden and the Government to have some serious conversations. The current policies are not sustainable.

‘This is not about trying to avoid taxes. It’s about, can we come to a sensible arrangement with some financial help here, pressure on the Premier League there, and a longer time to pay HMRC debt? So clubs do not go bust.’

The Premier League has offered a mixture of loans and grants to support Leagues One and Two

The EFL rules have been designed to stop clubs running up huge tax bills, They ensure the League is informed by HMRC about the clubs’ tax affairs and if they default on their payments they will ‘not be permitted to register any player’.

The EFL board discussed altering these rules on Thursday and clubs will be informed in writing.

But some clubs want to go further and when the League clubs’ chairmen meet later this week they are expected to push for the 12-point deduction that is triggered by an ‘insolvency event’ to be removed, too.

This would create the possibility of a club buying itself out of administration and continuing without being forced into relegation. 

The EFL has introduced a £50m emergency loan fund for clubs on the edge of administration

EFL clubs are currently faced with what one official called a ‘double whammy’.

HMRC agreed with individual clubs to delay tax payments until October, now those bills are due, along with additional demands for November.

The clubs agreed to the October deadline because the government had indicated a phased return of fans, and therefore income, from October 1.

However, while the government allowed people to attend indoor events, football fans remained banned from stadiums. Attendance at all events has now been postponed because the country is in a second national lockdown until December 2.

Rick Parry (right) has warned that clubs going bust would be politically damaging

The increasing tax debt further raises the prospect of clubs going bust, which EFL chairman Rick Parry has been quick to point out would be politically damaging to the Government and Prime Minister Boris Johnson.

Meanwhile, the issue of a bailout for the EFL remains unresolved.

On Thursday, the EFL board considered the latest Premier League offer of £20m in grants, £30m in loans for Leagues One and Two and additional undisclosed support for Championship teams. The proposals will go to the clubs for consideration next week.

Fleetwood Town’s chief executive Steve Curwood has already said the £50m offer is ‘far from anything which will solve the problem’.

The sum is well short of the £250m EFL clubs have lost during the Covid-crisis, and sought by Parry. Eight clubs are already receiving life-support loan payments from the EFL and another 12 are expected to need similar help to avoid going bust by the end of the year.

Culture secretary Oliver Dowden is disappointed that an agreement is yet to be reached

Even so, Mr Dowden has never wavered in his view that the Premier League has adequate resources to support struggling teams in the lower leagues.

The Culture Secretary told MPs on Thursday that he was ‘very disappointed in the current situation and the inability of football to come to that agreement’.

And Parry and Premier League chief executive Richard Masters will be hauled before the Department of Culture Media and Sport committee of MPs on Tuesday to explain themselves. 

Dowden believes lavish spending in the summer transfer window, in which the net spend of Premier League clubs was £800m, the highest figure in Europe, proves that the cash is there to bail out the EFL.

Rick Parry (chairman of the EFL, left) will put the Premier League’s (led by chief executive Richard Masters, right) £50m package to clubs in the Championship, Leagues One and Two

While EFL club officials spoken to by Sportsmail agree the Premier League should do more than it is currently offering, they see that as only part of the solution and the Government must step in too.

The Premier League points out that while individual owners in the top flight may have extraordinary wealth to lavish on their teams in transfer fees and wages, the Premier League itself is a private company that does not have unlimited resources.

Furthermore, they say, the top-tier is made up of a diverse group of clubs that are not all super-rich and some teams would suffer badly if Premier League resources were diverted from them to the EFL, since they are stretched, too.

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