Financial Fair Play investigation

[roydo]

EFC has a capital gains tax liability on profit when selling an asset. It's the same way you or I would have a tax liability on shares, if we bought 100k worth of shares and sold them for 130k we would have to pay 20% CGT on the 30k profit. Gordon is treated as an asset but as he is homegrown he is deemed to have cost EFC nothing (there is no ability to claim the cost of developing him for the purpose of CGT calculation). EFC sold him for 40m and HMRC takes 20% of that 40m from EFC.

Unless there is a special football player CGT rule, companies do not pay CGT.

Grealish may have tipped Villa into paying more Corporation tax on the profit, once his fee was lodged in that years accounts.

 

[roydo]

Yes, I agree, I obviously do not know the detail but it is widely reported that the alleged infringement is related to the 21/22 season.

Re Gordon, I was just pointing out to Mr P that all the Gordon money wasn't for EFC

Indeed, transfers are rarely a straight line. Gordon was an accounting need. As was Digne.

 

[Mr Popodopolous]

Other than a charge for non-submission of accounts, which I do not believe is the case with EFC, a club cannot be charged with FFP or P&S breaches without having already released accounts or at least their preliminary accounts, which are the expected accounts to be filed a few months later. It is only if something changes between the preliminary and final accounts, that the preliminary accounts would be amended. What accounts are u suggesting the club releases?
If EFC has not given the PL their accounts on what basis are they being charged for breaking P&S?

I suppose I'm cross purposes. What I'm saying is that a club under suspicion, release to CH accounts in December to prove innocence to a wide audience.

Birmingham were charged pretty much a month or two after the end of their Reporting Period.

Clubs submit to the League iirc:
A) Their Projections in March for the existing sesson.
B) They update their Projections in July or whenever to the League which can enable further action in August or September.

Given that Everton were on the radar as a potential issue...why the huge time gap? Birmingham were referred for failing in August 2018 for 3 years of accounts that ended June 30th 2018- are the PL much more reactive?

 

[Mr Popodopolous]

Unless there is a special football player CGT rule, companies do not pay CGT.

Grealish may have tipped Villa into paying more Corporation tax on the profit, once his fee was lodged in that years accounts.

FFP is profit or loss before tax so that bit would be irrelevant on one level.

 

[Mr Popodopolous]

I think, and I stress think, its the accounts from 21/22 that have been questioned by some clubs. But as far as we were concerned, EFC and the PL had cooperated to ensure compliance. Hence the theory that the PL have been badgered after already saying we were ok into a commission, which, fingers crossed, is nowt more than some window dressing.

But despite that, no one has a clue.

The 3 year period ending in 2022 but again I think rather than know.

A commission either could ratify it or if it's Independent could call into question certain Covid losses and hand down sanctions. Or anything in between.

 

[roydo]

FFP is profit or loss before tax so that bit would be irrelevant on one level.

What bit? The fact that companies dont pay CGT. If Villa made a profit cos on the Grealish fee, they would have paid Corporation Tax.

 

[Villa_Fan]

Unless there is a special football player CGT rule, companies do not pay CGT.

Grealish may have tipped Villa into paying more Corporation tax on the profit, once his fee was lodged in that years accounts.

There is a special football player rule. The rule is that the club is not allowed to allocate any costs they incurred during the development of the player in the CGT calculation and the CGT must be paid on the full transfer fee.

It is also worth bearing in mind that player transfers between two English clubs are subject to VAT at 20%. So Toon had to pay EFC 20% extra for VAT. It was not disclosed whether the 40m was including or excluding VAT, but the media tend to try and report the highest number possible so it is probably the case that Gordon was 33.3m + 20% VAT. As per above, CGT does have to be taken from this too. EFC can write off other VAT purchases against his 6.7m VAT received from Toon but it is still more cash for HMRC

 

[Mr Popodopolous]

What bit? The fact that companies dont pay CGT. If Villa made a profit cos on the Grealish fee, they would have paid Corporation Tax.

Of course corporation tax but that's in the Profit or Loss statement.

Put simply a club pre tax Profit £10m
Corp tax £2.2m
Profit therefore £7.8m.

For FFP it's the £10m figure that's pertinent. Likewise.

Pre tax loss £15m
Unused tax losses or similar £3m

It's the £15m figure for FFP.

Is my understanding.

 

[roydo]

There is a special football player rule. The rule is that the club is not allowed to allocate any costs they incurred during the development of the player in the CGT calculation and the CGT must be paid on the full transfer fee.

It is also worth bearing in mind that player transfers between two English clubs are subject to VAT at 20%. So Toon had to pay EFC 20% extra for VAT. It was not disclosed whether the 40m was including or excluding VAT, but the media tend to try and report the highest number possible so it is probably the case that Gordon was 33.3m + 20% VAT. As per above, CGT does have to be taken from this too. EFC can write off other VAT purchases against his 6.7m VAT received from Toon but it is still more cash for HMRC

Fair enough. Think you are wrong, (CGT), but whatever.

 

[Villa_Fan]

FFP is profit or loss before tax so that bit would be irrelevant on one level.

I know, but it was specifically regarding Gordon which is irrelevant to the FFP charge as his transfer is from a different financial year. I was just pointing that all the money from his transfer is not for EFC

 

[good times bad times]

Dyche unresponsive about the investigating, according to him we have the top financial experts on internet forums working on it, who know at least three financial terms so no biggie

#Amortisation

Mad how many accountants and lawyers with financial expertise there are on here. Never would have guessed it if it wasn't for this story.

 

[Mr Popodopolous]

I know, but it was specifically regarding Gordon which is irrelevant to the FFP charge as his transfer is from a different financial year. I was just pointing that all the money from his transfer is not for EFC

Okay thanks, that's interesting.

If I've got this right then, as an academy prospect he's got a book value of zero but if he was sold for £40m it wouldn't show as £40m - Net Book Value of Zero= Profit on Disposal?

It'd be £40m - CGT=Profit on Disposal?

 

[Mr Popodopolous]

I mean you wouldn't expect anything else from a manager.

For one it's toeing the party line, can in fact use it to advantage and well the club may have their view, the League quite another and that is why the Independent Panel has come into play IMO. To adjudicate and decide.

 

[Yarrgh]

Mad how many accountants and lawyers with financial expertise there are on here. Never would have guessed it if it wasn't for this story.

I may not be an accountant but I recognise hogwash when I see it. Currently we have two suspiciously new posters yammering about CGT which isn't paid by corporations or businesses or sports clubs. This was just picked up by @roydo and seems to be studiously ignored.

Cue another 10 pages about what the football league would do and other irrelevance by people who haven't seen the financial report from Everton about charges that haven't been explicitly made public.

 

[Mr Popodopolous]

I may not be an accountant but I recognise hogwash when I see it. Currently we have two suspiciously new posters yammering about CGT which isn't paid by corporations or businesses or sports clubs. This was just picked up by @roydo and seems to be studiously ignored.

Cue another 10 pages about what the football league would do and other irrelevance by people who haven't seen the financial report from Everton about charges that haven't been explicitly made public.

It sounds like the charge or referral is for an accusation of failing FFP in the 3 year period to 2022 which I take to be an accusation of a breach of the loss limit. Sure more will come to light over time.

Your theory as to why Everton have been referred will be interesting...

It would not surprise me if Everton have numbers that show compliance and the League calculation shows otherwise hence a referral.