Portsmouth moved a major step closer to becoming the first Premier League club to enter administration after the high court threw out their challenge against a winding-up petition which was served by Her Majesty's Revenue and ­Customs before Christmas.

It means that within three weeks the 112-year-old club could face liquidation and potential oblivion. Separate talks between Portsmouth and the Premier League to lift the player registration embargo are thought to have progressed, though the ban remained in place this evening.

Portsmouth's high court challenge stated that the VAT portion of its tax bill was too high by £7.5m but Mr Justice Newey was not convinced. It seems almost certain that Portsmouth will appeal, ahead of the proposed 10 February date for the petition's hearing. HMRC, however, are confident that the hearing will go ahead as scheduled.

Its statement read: "We welcome the court's dismissal of the application to have our winding-up petition struck out. We now expect that, subject to any appeal, the petition will in due course be heard by the high court in the usual way."

If the petition is heard then potential outcomes include the court allowing ­further time to pay the monies or ordering the winding-up of Portsmouth, with or without granting the club leave to appeal.

If the club are ordered to be wound up then according to HMRC's own rules: "The company will go into liquidation and the court will appoint a liquidator to wind up its affairs. The liquidator's main aim will be to realise the company's assets to pay its creditors. The company will then be dissolved and struck off the Register of Companies. Any money left will go to the shareholders."

Portsmouth's directors could also be disqualified from running any further companies for between two to 15 years, while there would be an investigation into whether the club had engaged in financial irregularities, including wrongful trading, deliberately withholding payments to the crown and made transactions at under value. However, the club claimed renewed optimism that they could yet prevent the order. Part of a statement from their solicitors, Neumans LLP, read: "Despite ruling against the club, Mr Justice Newey commented that he had found the issues in the case 'difficult' and he granted Portsmouth FC permission to appeal.

"This means that the judge considered any appeal to the court of appeal would have a 'real prospect of success'. If an appeal were to succeed, this would result in the judge's ruling being reversed and HMRC's petition being struck out, without the petition proceeding to a final hearing.

"Having been given permission to appeal, the club now has seven days to lodge an appeal. At present, the club is not able to estimate when any appeal as may be made will be heard by the court of appeal."