Talks have begun to wipe millions of pounds off Derby County’s tax debt

Talks have opened with HM Revenue and Customs over reducing Derby County’s tax debt as administrators battle to save the club.

The Championship side are believed to have problem debts of around £60million, including £28 million owed to the taxman.

As reported by Sportsmail, the market value of the club is well below the level of the debts, and any deal to save the stricken outfit will require the taxman to ‘take a haircut’, if Derby is to survive.

There arethree months panic-free leeway, and beyond that the January transfer window will be open if player sales are required for further funding

Initial talks with the Revenue have taken place, but critical meetings lie ahead once reports have been received on the value of the club’s assets.

‘As it stands, the future hangs in the balance,’ one source, who has acted for potential buyers, told Sportsmail earlier this week. ‘It comes down to – are HMRC going to cut a deal?’

That process has now begun. But analysts say the tax debt will have to be reduced by millions of pounds to make a sale viable.

As well as money owed to HMRC, Derby also has a debt of £15m to MSD Capital, it owes football creditors, such as other clubs and former players, and suppliers.

The administrators, Quantuma, were called in by former owner Mel Morris last month after heavy spending over a number of seasons failed to deliver Premier League status and debts racked up.

Pride Park is a fine stadium holding 33,000 fans but it is no longer owned by the club

Pride Park is a fine stadium holding 33,000 fans but it is no longer owned by the club

The administrators are trying to find a mechanism to reduce the debts to make the club attractive to potential buyers since analysts value Derby at significantly less than £30m.

While manager Wayne Rooney and his team are fighting hard on the pitch, the club sits bottom of the Championship after a 12-point deduction for going into administration.

They may be heading to League One with a further nine-point deduction looming for failing to comply with the EFL’s financial rules.

The tax debt is particularly problematic because the Revenue now has Crown Preference, for the first time since 2002, following a change in the law. This means the taxman has preferential status in any settlement.

Wayne Rooney's side are bottom of the Championship on two points after a 12-point deduction following administration  and another nine-point deduction is likely for breaking financial rules

Wayne Rooney’s side are bottom of the Championship on two points after a 12-point deduction following administration  and another nine-point deduction is likely for breaking financial rules

The administrators will argue that they can secure HMRC more money if they sell the business as a going concern rather than liquidate it, even though the sum the taxman receives will be less than he is owed.

They are likely to offer a sum equivalent to the sale of club’s ‘floating’ assets less expenses – predominantly players – and then 25 pence in the pound on the remaining balance. Unsecured creditors, like kit and pie suppliers, will also be offered 25 pence in the pound in line with EFL rules.

The administrators are acutely aware that HMRC will need to be assured their preferential status is being observed. In the past, the Revenue has been infuriated by clubs in administration honouring their football debts in full – as required by league rules – but not the taxman.

Derby fans have rallied in support of the team, which is picking up points in the Championship

Derby fans have rallied in support of the team, which is picking up points in the Championship

A key issue will be how much historic and current debt is owed to football creditors, which will have to be paid. Future debts – scheduled instalments on transfer fees, for example – will become the responsibility of any new owners.

Derby’s position around football creditors was eased a little last week, when Arsenal agreed a deal to defer a payment worth over £1.4m for their former midfielder Krystian Bielik.

He signed for the Rams in August 2019 for a fee up to £10m, but has suffered two serious knee injuries since arriving in the East Midlands.

Another issue the administrators must resolve involves Derby’s stadium, Pride Park.

It was sold to a company owned by Morris in 2017-18 to raise money for the Rams’ promotion pushes and it is believed to be the security on the MSD debt.

MSD will have to be part of the solution, since Derby must confirm it has use of the stadium for at least 10 years in order to comply with EFL rules.

Despite their troubles off the field, Derby are fighting hard on it with two wins and two draws in their last five league games - they sit bottom of the Championship on two points

Despite their troubles off the field, Derby are fighting hard on it with two wins and two draws in their last five league games – they sit bottom of the Championship on two points

Meanwhile, Derbyshire MPs will be briefed on the crisis by the EFL this morning.

There is a strong political dimension to the club’s plight. Derbyshire is part of the ‘Red Wall’ of constituencies that ensured Labour’s Parliamentary strength for decades, only to see it crumble at the last election.

Well in excess of £100m is owed to Derby owner Mel Morris in soft loans, and he will not be seeking a penny

Well in excess of £100m is owed to Derby owner Mel Morris in soft loans, and he will not be seeking a penny

The Conservatives gained three seats in the county in 2019, including Bolsover, which was the strong hold of the Labour stalwart, Dennis Skinner. The Conservatives had never won the seat since it was formed in 1950.

In addition, the Conservatives took Derby North and High Peak and they held on to North East Derbyshire, which the Party won at the 2017 General Election for the first time in 82 years.

Ministers are keeping their distance from the Rams’ rescue efforts, but they must be watching on anxiously, since failure to save the club would surely undermine their policy of ‘levelling up’ the economies of the midlands and the north, with the south east of England.

At his speech to the Conservative Party conference yesterday, Prime Minister Boris Johnson described levelling up as ‘the greatest project that any government can embark on’.

Clubs like Derby County are not only important economic drivers, but also bring significant community and social benefit and are vital to sustaining local identity.

The loss of a club that has existed since 1884 and been a major player in English football, crowned champions in 1972 and 1975, would be devastating.

Source link

Share

What do you think?

Comments

Leave a Reply

Power crisis looms in India with only days remaining for coal stocks

Sergio Aguero back in training for Barcelona… and could now make his debut against Real Madrid