Falkirk fined for late tax payment

Falkirk Stadium
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Falkirk Football Club has been fined by the tax man for not paying its bills on time.

It challenged the demand from HM Revenue and Customs for late payment penalties but lost the case at an Appeals Tribunal and was ordered to pay over £11,500.

Chairman Martin Ritchie claimed the club had relied on assurances from the then managing director George Craig that everything was “okay” with HMRC.

In her findings Judge Anne Scott criticised Mr Craig’s actions and the role played by the advisor from a “reputable” accountancy firm hired to manage the payroll.

The tribunal was told between May 2010 and February last year the First Division club was late with six PAYE payments totalling £322,213.97 and a bill for £101,885,75 was outstanding for more than six months.

It heard The Bairns had faced “serious challenges” in 2009/10 while in the Scottish Premier League and the collapse of the television deal with Setanta had lost the club around £400,000. At the end of that financial year the board was told HMRC was owed around £83,000.

Without the help of the full-time semi-qualified person who had been working on their finances but let go as part of cutbacks at the end of that season, it was left to Mr Craig and the ‘expert’ employed one day a week to handle the cash flow and agree a payment plan with HMRC.

The club claimed relegation “intensified” the pressures but, at a meeting of the board in July 2010, Mr Craig reported a ‘time to pay’ (TTP) arrangement had been agreed and the directors believed the problem had been solved. Despite a ‘parachute payment’ of £250,000 from the SPL the club faced substantial loss of income and more cost-cutting measures were introduced.

Judge Scott was shown detailed evidence of the steps the board took to balance the books - but in December 2010 HMRC threatened to go to court to wind up the company if outstanding debts of £308,000 were not paid within seven days. A payment timetable offered by Mr Craig was rejected that January and proceedings started.

The Tribunal heard there was no TTP deal for 2010/11 and no approaches made to HMRC about payments until December that year. In February 2011 when the PAYE debt for May 2010 alone was in excess of £75,000 the board secured a loan from shareholders and used that money to fund payment plans with other major creditors.

The club argued it had a “reasonable” excuse for late payment claiming it had relied on assurances from Mr Craig that everything was “okay” with HMRC and he had misled them and the first they had known of the problems was when HMRC took action.

But in her summing up Judge Scott said: “The HMRC payments were not being made on time and the professional advisor should have been aware of the penalty regime. The fact the club relied on her does not amount to a reasonable excuse. The situation with Mr Craig is rather different. Since he was managing director he was in fact ‘The Club’ and his actions in that role were as the Club. The fact he did not ensure timeous payment knowing as he did the problems in the previous year and the availability of TPP would make it very difficult to argue that he was unaware of the potential problems caused by the late payment of PAYE. The tribunal finds no reasonable excuse for his actions.

“The board carefully monitored every major creditor on a monthly basis and in detail. They ensured they had arrangements in place with every major creditor. However the single biggest creditor was HMRC. Knowing the debt had accrued, that their salary costs remained largely fixed and they were moving into a period with significantly lower income available to cover those costs a prudent board should have been very concerned to monitor the cash flow and ensure there was no repetition of the 2009/10 debt. In the circumstances the Tribunal is not satisfied on the evidence that there is a reasonable excuse for the late payments or that the penalty was disproportionate or unfair.”