Everton & Nottingham Forest Q&A: Why is Premier League charging clubs with breaking spending rules?

Young Everton fan protests against Premier League charges
A young Everton fan after the club was deducted 10 points for breaching Premier League financial rules

Everton and Nottingham Forest now face new cases of alleged breaches of the Premier League’s financial rules.

With Everton already docked 10 points and awaiting an appeal against that previous charge, BBC Sport looks at the key questions this latest development raises.

What happens next at end of the Premier League season?

These new Premier League cases have to be heard by 8 April, although given that is a Monday, they are likely to be concluded the previous week.

But Everton’s case cannot be heard until their appeal against a 10-point deduction by a previous commission has been determined. That is likely to be the end of February or beginning of March.

On 8 April, there will still be six full Premier League match rounds to play, with the possibility of some rearranged games, meaning it is likely the relegation places will not have been decided.

So any decision that ends in a points deduction is virtually certain to be subject to an appeal, even as a pre-emptive strike by the clubs – and that brings the potential for chaos as there is no guarantee any appeal would be heard before the final games of the campaign on 19 May.

Those final-day fixtures? Burnley v Nottingham Forest and Arsenal v Everton.

In terms of actually playing matches, that is when the season ends. But in terms of regulation, the 2023-24 season remains ‘live’ until the annual general meeting in June when the relegated clubs transfer their certificates. It is this point at which everything has to be determined.

The current Premier League table

What rules have been broken?

The profit and sustainability rules (PSR) are aimed at promoting financial stability within the Premier League.

They were introduced in 2015-16, although the demand to protect clubs from overspending can be traced back to Portsmouth who, in 2010 became the first – and so far only – Premier League club to go into administration after failing to find a buyer who would pay off spiralling debts of about £60m.

The current rules limit the losses clubs are allowed to make, although the figure can be inflated by external owner-driven funding.

However, the rules are due to be switched so, like Uefa, spending is linked to turnover.

Opponents of the rules argue they prevent significant investment from wealthy backers and, by definition, maintains the status quo of the biggest clubs remaining the richest and most successful.

How much are clubs allowed to spend?

Essentially, clubs are allowed to incur losses of £105m over a three-year reporting cycle.

The rules were loosened slightly during the Covid pandemic and there are various elements of club business, such as academies, that clubs can spend on without it affecting their profit and sustainability submissions.

It is also a quirk of accounting that selling ‘home-grown’ players has more of an impact than selling a player that has been bought for a fee, such as Manchester City’s £40m sale of Cole Palmer to Chelsea this summer. https://gayunggoyang.com/

What impact do the rules have on clubs trying to compete?

Newcastle and Aston Villa are both large Premier League clubs, with rich histories and wealthy owners who are finding the quest to break into the established top six a challenge.

Both have said in recent days they may be willing to accept a large offer for one of their star players in order to create room to bring more players into their squads.

Speaking last week when Newcastle released their latest financial accounts, chief executive Darren Eales pointed out the Magpies’ revenue was about £250m, compared with Tottenham’s £440m.

What has changed this season and what changes are coming?

Everton were charged in March 2023 over alleged profit and sustainability breaches. Their hearing was in October.

They were deducted 10 points in November and have appealed against the punishment.

Last spring, the clubs threatened with relegation over that period – Nottingham Forest, Southampton, Leeds, and Leicester, plus Burnley who had been relegated at Everton’s expense the season before – threatened legal action because the potential punishment was not going to impact the period when the rules were said to have been broken.

In response to this, the Premier League brought in new rules which meant clubs had to make their profit and sustainability submissions for the football financial year ending in June by 31 December in the same year.

Future changes are still to be confirmed but are set to be in line with Uefa’s Financial Fair Play (FFP) rules, which will eventually allow clubs to spend a maximum of 70% of their income on wages, transfers and agents’ fees.

Will clubs have points deducted?

Anything from a warning, to a fine, to points deductions. Everton’s 10-point penalty for essentially exceeding the limit by £19.5m has focused minds and shows why clubs are so keen to keep their spending within allowable limits.

Everton admitted they had spent more than they were allowed but put forward six mitigating factors for their breach, including the Covid-19 pandemic reducing the value of their players and the amounts they were able to generate by selling them. Five of the mitigating factors were dismissed.

What about Manchester City?

One response from some football fans assessing profit and sustainability charges tends to be ‘what about Manchester City?’

City were charged in February 2023 with more than 100 offences relating to their spending, which date back to 2009 and include allegations of hidden payments and non-cooperation. It is thought unlikely there will be a resolution until the end of the 2024-25 season.

Because these are historic charges over multiple years, all of which are contested, the case is fundamentally different to the recently announced ones which are regarded as more straightforward, with the arguments over breaches likely to centre around differences of opinion over actual spending or the amounts that can be claimed back.

What about Chelsea?

Despite some speculation, Chelsea have always believed they are compliant with football’s financial rules, even with the massive outlay on transfers over the past 18 months under the Clearlake ownership group.

The Blues have spent about £1bn on players, but the way they have gone about it has changed the way transfers are dealt with in the Premier League.

The offering of extra-long contracts, for example the Enzo Fernandez eight-year deal following his £106m transfer, meant the club could stretch the payment of the fee over the length of his contract.

That tactic is called amortisation, and after Chelsea did it with a number of their signings, Premier League clubs have voted to limit the time a club can spread the cost of a transfer over a player’s contract to five years.

Chelsea would also point to the £450m in player sales they have brought into the club. The selling of academy graduates, such as Ruben Loftus-Cheek, Mason Mount and the loan deal involving Lewis Hall has seen the club be able to put a huge amount of ‘pure profit’ in their books.

Conor Gallagher has been linked with a move away, and if the club were needing to get some financial breathing room they would have the option to sell Gallagher, Ian Maatsen and Armando Broja.

Chelsea could face further scrutiny over reports of payments connected to the club’s former owner Roman Abramovich. The FA and the Premier League are investigating, while Uefa fined them in July for “submitting incomplete financial information” between 2012 and 2019.

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