Taxman's demands deepen Leeds crisis
By David Bond
Last Updated: 1:36am BST 03/08/2007
The taxman and the Football League yesterday turned up the heat on Ken Bates, placing Leeds United's chances of starting the new season in even greater jeopardy.
In a rare public statement, David Hartnett, the second most powerful official at HM Revenue and Customs, signalled the taxman's determination to challenge Bates' plans to buy the club out of administration in a deal worth just £1.8 million.
Not only did Hartnett insist that Leeds must pay the £7.7 million owed in tax, but he also demanded that Bates must reveal the identity of the mysterious backers behind his new bid for the club.
His comments came after Lord Mawhinney, the chairman of the Football League, insisted that the club would not be given the right to start the season in eight days' time unless the administrators, KPMG, agreed a new deal with the club's creditors, who are owed £35 million.
Bates failed in his original attempt to regain control of the club he first bought in January 2005 because HMRC launched a legal action against his attempts to write off the tax owed. Bates then bought the club from KPMG on July 9 through a new company, Leeds United 2007 Ltd.
The Football League, however, are refusing to hand over the share the new company need to take part in this season's competition until KPMG reach an agreement with all the club's creditors through a new creditors voluntary arrangement.
With HMRC still demanding full payment of their debt, the administrators have admitted that any attempt to obtain a new CVA would fail.
At the same time Leeds' biggest creditor, Astor, whose owners are unknown as the company is registered in the British Virgin Islands, have indicated that they will only back Bates' bid.
With Leeds' opening fixture of the League One season at Tranmere looming, the intervention of Hartnett, the director general of HMRC, could jeopardise the club's future and is the clearest indication yet that the taxman, who has lost millions of pounds through football club administrations in recent years, is drawing a line in the sand with the Leeds crisis.
Hartnett said: "HMRC believes it is vital that all creditors are treated fairly. HMRC is determined to achieve a full and fair settlement for the taxpayer. We are not prepared to enter into any arrangement that lacks complete transparency about the identity of creditors and the terms of any deal being reached."
Mawhinney, who held a four-hour meeting with officials from KPMG and Leeds on Monday, said the club would be allowed to start the new season, but only if the administrators resumed control.
"If the CVA could be reconstituted then Leeds United, in terms of the old company, could start the season," he said. "The administrator agreed they would go off and report back as to whether or not they can do that."
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Comments
At least the fans can start again. Hopefully Bates won't be allowed to do the same.
But on the other hand I think: F**k em - they're a really nasty bunch.
Such a dilemna!
Why not Arf? Businesses go bust all of the time - and big ones too. With all of the fuss HMRC make about tax avoidance these days I don't see how they can, or should, make an exception for Leeds/Bates seemingly pulling a fast one and simply write of the money they are owed. It's a classic phoenix trading situation - a company goes bust and a new one rises from the ashes and seeks to start with a clean slate.
(plus, it's Leeds!)
Would be incredibly sad to see any club go to the wall. But i think it needs to happen in this instance to prove as a warning to every other club to take their spending and level of borrowing more seriously so it doesn't happen again.
As for Leeds, they will be reborn, hopefully at the very bottom like every other club has to do, but will be back where they are within ten years.
Same will happen with Leeds, and I don't really shed a tear here
A club like Leeds going out of business would be a wake up call for many others, but alas I cannot see it happening. There will be some sort of underhand deal made to keep the club alive.
Dont like their fans either, always think they're a big club, Yes you WERE but your not any more.
Those with an interest, should read the excellent link below
http://blogs.guardian.co.uk/sport/2007/07/27/leeds_united_the_unanswered_qu.html
He continues (as does Ridsdale) to be considered a "fit and proper person" to run a football club by the powers that be. Therin lies the balme.
Let's be flippant - somebody like Bates will put in an offer for Bradford City, compete in Division 2 for a season and then rename them something like Leeds & Bradford United.
They will then move to a mothballed Elland Road and eventually the Bradford part of the name would be dropped.
Et Voila!.......you have a brand new Leeds United back at their old ground and established in the Football League.
And nobody would give a toss except for a few thousand Bantams.
The original Leeds City did not go bust as such. They were expelled from the Football League after an illegal payments scandal in 1919.
Perhaps the Football League should expell Ken Bates for just being scandalous?
Leeds appealing
You have to remember that we were close to going out of business in the early 80's.
The size of the sums involved may be different but Mark Hulyer made a complete pigs ear of running Charlton, much in the same way Risdale has done at Leeds.
As has been said the ones who really suffer are the fans. I've always though Leeds fans arrogant but wouldn't want to see Leeds go under.
Personally I'd like to ban Risdale and Bates from having any involvement in running football clubs.
As a side issue. How close were Chelsea to being in finacial melt down before Bates was bought out by Abramovich?
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Very close, in the summer of 2003 Chelsea were around £100m in debt, with a £75m Eurobond outstanding and they had already borrowed against the next year's season ticket sales and TV revenues. The banks were circling and there was some doubt that they'd fail to make the next (i.e. the July payment) on the Eurobond, if true the only way they'd stay afloat was by restructuring the bond, which would have left Chelsea in further debt and that might only have delayed the inevitable as Chelsea were not in a position to trade anywhere close to solvency. Bear in mind that Chelsea at this time were a PLC and not a privately owned company and in addition the club owed a lot of money to the estate of Matthew Harding. The only thing that kept them from going bust was the value of the land that Stamford Bridge occupied, the net value of that underpinned the Eurobond and the loans.
Apparently the deal to buy Chelsea took around 15 minutes to conclude, although Bates tried to hold out for more money at the last minute before being told not to be "so bloody stupid" as he would walk away a multi-millionnare and not have to go through bankruptcy or insolvency that would almost certainly have seen him barred from ever owning a football club, or being a director of a company again and also from being personally bankrupted. Instead he trousered £17M from the deal, escaped all that and then went and blew it on Leeds - some people really need protecting from themselves.
What really saved Chelsea though was that they had made the next season's CL, the thinking was that if they hadn't then Abramovich was simply going to buy one of the clubs that had qualified and go from there.
Leeds appealing[/quote]
Leeds have no money, a 15 point fine and have been shedding players and unable to buy new ones. I'd say this makes them favourites for relegation. It isn't as though they have a good manager.
Great point kigelia. I shall be using that one in discussions in Floyds, if you don't mind...