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By Ollie Cooper, Money Team

Basically, Financial Fair Play (FFP) is a set of rules designed to prevent football clubs from spending more than they generate.

Many of us know that clubs like Everton have been fouled and penalized, while others (like Manchester City and Nottingham Forest) have been prosecuted. But it can be difficult to cut through the noise and understand what the real rules and issues are.

We will quickly update you on the content and implications of the current bill and any changes that may be implemented in the future.

FFP or PSR?

Of course, things need to get a little more confusing before it gets clearer.

Both the Premier League and UEFA (European football's governing body) have stopped using the term FFP.

The Premier League now uses the name “PSR”, which stands for “Profit and Sustainability Rules”. UEFA renamed the regulation “Financial Sustainability”.

The regulations are different but will soon be adjusted.

What are the Premier League rules?

Currently, each country and league has different rules, but we'll give you the Premier League set to keep things simple.

To put it most simply, the team must avoid recording a loss of more than $105 million from the combined accounts of the previous three seasons.

These are the headline numbers that need to be addressed, but frustratingly it's not that simple.

Terms of Use

That $105 million is not due to the fact that $90 million must be covered by the club owners' “safe funds”.

Safe financing is a brilliant way for owners to “buy more shares” rather than simply lending the club money.

This means the club could only lose $15 million of its “own” money every three years.

This means that losses over 15m but below 105m must be covered by the club owner. If you don't or exceed the 105m limit you are breaking the rules.

To add to the confusion, certain expenses may be deductible, such as investments in youth development, infrastructure or community projects.

The rules are similar when you get down to the leagues and tiers of English football, run by the EFL. The numbers get smaller and smaller (for example the highest figure in the Championship is 39m).

quick example

Club X and Club Y each spend in excess of $18 million over three seasons. This exceeds the PSR limit of 3m.

Club X has safe funds to cover $3 million, but Club Y does not. So Club

Club Y, on the other hand, broke the rules. That means you'll need to plan your finances for the next two seasons and offset your losses with safer funds (owners buying more shares).

Doesn't seem that serious, right?

harsher punishment

Crossing the 105m figure could see harsher punishments for rule-breakers referred to an independent committee who could impose heavy fines or, as we have seen this season, have their points deducted.

Another example:

Club A overspent by $110 million over three seasons. The owners' safe fund covers $90 million, meaning the club itself has lost $20 million. This is 5m over the 15m threshold and the club is now in breach of the PSR.

This brings us to Everton.

everton

The blue half of Merseyside has endured a tough few years. This was further exacerbated by the announcement earlier this season that the Toffees were deducted 10 points from the Premier League, putting the club in a relegation battle.

“Following a five-day hearing last month, the committee determined that Everton FC's PSR calculations for the period resulted in a loss of $124.5 million, which exceeded the $105 million threshold allowed under the PSR as claimed by the Premier League. It will be.” Premier League statement on November 17th last year.

Everton actually recorded a loss of $370 million during the billing period (2018-2021), but rule makers allowed large deductions to all clubs due to the COVID-19 pandemic, and a large portion of that total figure is the allowable expenses outlined earlier. was spent on stadiums, infrastructure, women's teams, etc.).

Despite these deductions and other mitigating circumstances factors, it was determined that Everton had spent $19.5 million in excess of the allowable threshold.

The club was also found to have misled the league about the source of its stadium funding and its intention to raise cash from player sales.

The club has grounds for appeal, which are currently ongoing.

Nottingham Forest and Everton (once again)

This year, although it is still early days, the Premier League has referred two clubs to an independent committee for breaches.

Everton are set to send their financial matters to the panel once again after further breaches were confirmed by the league, while relative Premier League newcomers Nottingham Forest follow slightly different rules.

Forest's allowable losses are lower than the 105m limit as it has been in the bottom half of the financial year. In terms of funding, the club allowed just 13m each in the 2020-21 and 2021-22 seasons when the team was in the Championship, and added 35m last season when they played in the Premier League.

Both clubs have been referred to the aforementioned independent committee, and it remains to be seen what punishment will actually be imposed.

Close the loophole

The Premier League recently moved to ban long-term amortization.

This spreads the transfer cost over several seasons.

Case in point: Chelsea.

The Blues have signed players for huge fees in big deals for three successive years (six transfer windows) to avoid being hit by the PSR.

Moises Caicedo joined on a reported $115 million eight-year contract worth $150,000 per week. If those numbers are accurate, that means the deal is worth a total of $177.4 million. It was so high that it would no doubt have set off alarm bells in the West London club's legal and finance departments.

solution? Spreading the transfer cost over eight years breaks it down into a much more PSR-friendly chunk of $22.18 million per year.

Chelsea completed similar deals for Enzo Fernandes, Mykhailo Mudric and Christopher Nkunku before the loopholes were plugged.

Clubs have now stipulated five seasons as the maximum number of seasons over which transfer costs can be spread out.

city ​​of manchester

Thank you for sticking with it for so long. Now we get to the big question.

WATCH: Spending accusations tarnish City's glory.

For this we enlisted the help of sports correspondent Rob Harris…

The Premier League's investigation into Manchester City is the largest and most complex.

This is not a simple matter of determining whether a club has overspent in its pursuit of glory.

The charges number 115, including deception to evade rules, failure to provide accurate information and lack of cooperation.

Proving your case can be difficult.

Documents obtained from inside the club via Football Leaks hackers revealed evidence that sponsorship income was inflated and linked to Abu Dhabi ownership.

If it weren't for the emails and documents sent by the city and the UAE, this case probably wouldn't have existed.

There has never been a detailed denial of the claims, only a claim from City that “there is irrefutable evidence to support their position”.

They succeeded in overturning the UEFA ban when UEFA investigated some of the allegations and found they were partly time-limited.

However, City was sentenced to a fine of 10 million won for obstructing the investigation.

Abu Dhabi's wealth has transformed City into a powerful force since Sheikh Mansour's takeover in 2008.

Whether or not the composition of your all-conquering team is within the rules will determine how you view all that success.

And any punishment, which City will strongly protest, could have far-reaching implications.

What changes can we see?

Recent reports suggest major changes could be imminent, with suggestions new rules could be in place by the summer. Last week, Premier League clubs held a series of discussions with PSR as one of the key points on their agenda.

However, Sky News understands that while changes are expected to happen eventually, they are unlikely to be implemented any time soon.

Any changes to the current legislation would require clubs to agree new rules and get them through the Premier League itself, with amendments or additions to ensure members can compete within UEFA and FIFA regulations while balancing their financial needs. A club in a lower football league.

What are UEFA's plans?

UEFA believes that “fair play” has been misinterpreted because it does not make competitions fairer.

Squad cost rules have just been introduced. This means that by 2025, clubs will only need to spend 70% of their income on salaries and transfer fees to participate in competitions such as the Champions League.

Club owners can recover up to $60 million in losses over three years, or $90 million if the club is deemed to be in good financial health.

Basically… read the other entries in the series.

Sources 1/ https://Google.com/ 2/ https://news.sky.com/story/inflation-uk-latest-interest-rates-sky-news-money-blog-live-13040934 The mention sources can contact us to remove/changing this article

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