The Premier League’s attempt to close a loophole that has allowed Chelsea to alleviate their Profit and Sustainability worries has been unsuccessful. English top-flight bosses have tightened the reins on financial matters at their clubs in recent years.
This has resulted in points deductions for Everton and Nottingham Forest, while Manchester City are awaiting the outcome of an independent panel’s investigation into the 130 charges brought against them.
Several other teams have felt the strain of PSR, with Newcastle and Aston Villa limited in the transfer market, whilst Manchester United have increased ticket prices in an effort to ease compliance concerns.
In this context, Chelsea’s heavy spending in the transfer market has raised eyebrows. The Blues have splashed out more than £1.1billion over the past three years, consistently topping the Premier League’s spending charts.
Despite this, they have managed to surprisingly steer clear of PSR trouble. Club executives have exploited a significant loophole to achieve this, prompting an attempt by Premier League chiefs to shut it down.
The loophole allows clubs to sell assets such as hotels to related companies and include the revenue in their profitability and sustainability calculations for the following season’s accounts.
Chelsea cleverly utilised a loophole when they offloaded two hotels to a company linked to their owners in 2023, incorporating the revenue generated into their PSR submission. The Blues also transferred ownership of their women’s team to a related company for a hefty sum of nearly £200million last year.
This savvy business move enabled the London club to register a net profit of £129.6m for the year ending June 30, 2024. However, league regulations stipulate that such associated party transactions must be conducted at fair market value.
The Premier League had been eager to seal this loophole, engaging with clubs on a proposal to hold a vote on a rule change ahead of the league’s annual general meeting on Wednesday. The proposed change aimed to exclude the sale of such fixed assets from clubs’ PSR calculations.
However, the proposal failed to garner enough backing to proceed to a vote, meaning the loophole will remain open for the time being. Chelsea’s hotel sales were given the green light by the league, although the value was reduced to a restated £70.5m in their most recent accounts, down from an initial £76.5m.
The valuation placed on the women’s team is still under review. Top-tier clubs decided against altering the rules surrounding the sale of fixed assets in 2021.
Simultaneously, the EFL implemented stricter rules for its clubs after some included revenue from the sale of assets such as stadiums in their financial sustainability calculations. UEFA’s financial sustainability rules prohibit the inclusion of the sale of fixed assets in revenue calculations.
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