Chelsea’s Financial Loophole Stays Open After Premier League Meeting | OneFootball

Premier League Fails to Address Loophole Exploited by Chelsea

In a key development for Premier League financial regulations, clubs will still be able to use the loophole that allows them to sell assets like hotels to related companies and include those sales in their Profitability and Sustainability Rules (PSR) calculations. This comes after no vote was held to alter the current regulations during a meeting at the Premier League’s annual general gathering.

Chelsea’s Financial Strategy Under Scrutiny

Chelsea were the first to benefit from this loophole in 2023. The club sold two hotels to a company linked to its owners, helping them comply with the Premier League’s PSR while maintaining a competitive edge in the transfer market. By including the revenue from the sales, Chelsea significantly improved their financial standing for the year, recording a net profit of £129.6m for the year ending June 30, 2024.

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Additionally, the London club also sold its women’s team to a related company at a valuation of almost £200million. This deal further boosted the club’s financials, lending additional credibility to the valuation when American tech mogul Alexis Ohanian bought a 10% stake in Chelsea Women for £20m last month.

Regulations and Fair Market Value

Under Premier League regulations, such associated party transactions must be carried out at fair market value. In Chelsea’s case, the sale of their hotels was initially valued at £76.5m, but this figure was later adjusted to £70.5m in their most recent accounts. The valuation of the women’s team, meanwhile, is still under review.

The Premier League had initially proposed a rule change that would exclude revenue from fixed asset sales in clubs’ PSR calculations. This proposal was discussed ahead of the meeting in Harrogate, but it did not gain enough support to move forward to a vote. As a result, the rules around such transactions will remain unchanged for the upcoming season.

Premier League’s Stance on Asset Sales

This issue first emerged in 2021, when the Premier League chose not to implement stricter rules regarding the sale of fixed assets like stadiums. While the English Football League (EFL) introduced tougher financial regulations for its clubs, including a ban on accounting for asset sales in financial sustainability measures, the Premier League opted to keep its existing framework in place.

This was reiterated in the 2023 meeting, where Premier League clubs voted against changing the rules. As a result, clubs like Chelsea can continue to use asset sales as a means to balance their financial books, something that may be scrutinised further by European governing body UEFA. Chelsea are reportedly in discussions with UEFA over the sale of these assets and a potential financial settlement.

As financial sustainability rules become more pressing in the current football landscape, clubs will continue to look for ways to navigate these regulations. Whether or not the Premier League will take further action in the future remains uncertain, but for now, Chelsea and others are able to exploit these loopholes to their advantage.