91探花

The 2023/24 English Premier League (EPL) season highlighted the rising scrutiny on clubs’ financial obligations, with Everton and Nottingham Forest both receiving points deductions during the year. This additional scrutiny arguably led to a quiet 2024 January transfer window, and a change in focus for many clubs in the 2024 summer transfer window.

Previously referred to as ‘financial fair play’, the EPL profit and sustainability rules (PSR) are a set of regulations intended to promote financial responsibility and ensure the long-term sustainability of EPL clubs. The rules dictate that clubs cannot incur aggregate relevant losses in excess of £15m, on a rolling basis, across three football seasons. This figure can be increased to £105m where a club’s owners can guarantee funding to cover the additional £90m shortfall, which generally requires the owners to inject share-based equity into their club.

The points deduction inflicted on Everton has set the precedent, though delays in calculating their losses for the three-year period to 2021/22 meant that they were penalised twice in one season. There is now a more defined structure around points deductions. Clubs will face an immediate three-point penalty for losses exceeding the loss threshold over the three-year period, and potentially suffer additional deductions based on the extent to which they have breached the threshold. Consideration may also be given to co-operation and extenuating circumstances, which has led to some relief on previous proposed points deductions.  

The PSR include various exemptions designed to avoid disincentivising development and maintain the attraction of English football. For instance, expenditure on youth development, developing women’s teams, training facilities, stadium infrastructure and so on are exempted in calculating the relevant losses.  

The EPL is clamping down on 'loopholes' used by clubs to mitigate the impact of the PSR, such as signing players on ultra-long contracts. However, some permitted options remain. For instance, clubs can potentially amend their accounting period to shift income and expenditure into a different period; carefully consider the timing of player transactions; and, make use of ‘player exchanges’, particularly for academy players.

Examples of such permitted arrangements include the loan agreement between Arsenal and Brentford for David Raya, allowing Arsenal to minimise spending in the summer of 2023, in which they had already paid a record fee for Declan Rice, before making the transfer permanent the 2024 summer transfer window. In the past, Chelsea drew attention for their use of eight-year contracts, which prompted regulatory changes, with contract periods now being limited to five years. This move towards shorter contracts will also be impacted by the upcoming changes to the UK’s non-domicile tax regime, set to take effect from 6 April 2025, which are expected to make even these five-year contracts less appealing for foreign players. This is because, whilst the new non-dom tax regime is expected to allow foreign income and gains to be free of UK tax consequences, whether or not the amounts concerned are remitted to the UK, this exemption will only apply for four tax years, which compares to the current remittance basis system on which unremitted income and gains do not suffer UK tax, which could be claimed for up to 15 years. 

As highlighted by the promise of new spending cap rules to be implemented in the 2025/26 season and the new government’s reintroduction of the Football Governance Bill, the regulations that apply to football clubs and their players are continually changing and evolving. It is therefore important for clubs and their advisers to stay ahead of the game and avoid off-field punishments. Coupled with the government’s proposed changes to the UK non-domicile tax regime, could we see a shift from clubs signing established foreign stars to nurturing home-grown talent? As always, it will be interesting to see how the footballing world continues to adapt.