Derby facing EFL investigation over "financial irregularities"



Grumpy Old Man said:
Just had a quick look. It's murky to say the least. It looks as though, from the disposals figure, Pride Park was valued at £56m (forget the depreciation number, it's the cost that matter here). This looks, on face value, like a sale to a related party at a higher than arms length price, presumably to create enough profit in DCFC to enable them the meet the FFP loss limit. This is far from normal practice, which is that transactions between companies in the same group or under common ownership take place at an arms length valuation. It's highly likely that HMRC will also take an interest in the transaction to determine whether there has been a breach of transfer pricing regulations.


It's more the reasons for doing it. This looks awfully like an artificial transaction designed solely to circumvent the provisions of FFP.
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I understand the arms length thing but why would HMRC get involved, it's the opposite way from what would bother them. They're surely getting more tax than a real transaction
 
parsonjohn1985 said:
I understand the arms length thing but why would HMRC get involved, it's the opposite way from what would bother them. They're surely getting more tax than a real transaction
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Not if Derby are moving profit from a company paying tax to a company with accumulated losses which isn't paying tax. I don't know about the company who've bought the property but Derby FC definitely fit the definition of the second. Also, there are specific rules about asset transfers crystallising tax payments but I'm not familiar enough with them. It's not just about how much profit a company makes = tax it pays.
 
mikemanc said:
Not if Derby are moving profit from a company paying tax to a company with accumulated losses which isn't paying tax. I don't know about the company who've bought the property but Derby FC definitely fit the definition of the second. Also, there are specific rules about asset transfers crystallising tax payments but I'm not familiar enough with them. It's not just about how much profit a company makes = tax it pays.
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Ah of course good point. I was just thinking of the cgt but yeah, accumulated losses will kill that.
 
Grumpy Old Man said:
Just had a quick look. It's murky to say the least. It looks as though, from the disposals figure, Pride Park was valued at £56m (forget the depreciation number, it's the cost that matter here). This looks, on face value, like a sale to a related party at a higher than arms length price, presumably to create enough profit in DCFC to enable them the meet the FFP loss limit. This is far from normal practice, which is that transactions between companies in the same group or under common ownership take place at an arms length valuation. It's highly likely that HMRC will also take an interest in the transaction to determine whether there has been a breach of transfer pricing regulations.


It's more the reasons for doing it. This looks awfully like an artificial transaction designed solely to circumvent the provisions of FFP.
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If the £56m the supposed fair value of the stadium? When was it last revalued on the balance sheet? Unquestionably murky, just not sure this is necessarily the right reference point.
 
Grumpy Old Man said:
Just had a quick look. It's murky to say the least. It looks as though, from the disposals figure, Pride Park was valued at £56m (forget the depreciation number, it's the cost that matter here). This looks, on face value, like a sale to a related party at a higher than arms length price, presumably to create enough profit in DCFC to enable them the meet the FFP loss limit. This is far from normal practice, which is that transactions between companies in the same group or under common ownership take place at an arms length valuation. It's highly likely that HMRC will also take an interest in the transaction to determine whether there has been a breach of transfer pricing regulations.


It's more the reasons for doing it. This looks awfully like an artificial transaction designed solely to circumvent the provisions of FFP.
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Like Steward Donald "selling" the naming right to the Stadium to Bridle Insurance (before he sold it obvs) for £200m?
 
Grumpy Old Man said:
Just had a quick look. It's murky to say the least. It looks as though, from the disposals figure, Pride Park was valued at £56m (forget the depreciation number, it's the cost that matter here). This looks, on face value, like a sale to a related party at a higher than arms length price, presumably to create enough profit in DCFC to enable them the meet the FFP loss limit. This is far from normal practice, which is that transactions between companies in the same group or under common ownership take place at an arms length valuation. It's highly likely that HMRC will also take an interest in the transaction to determine whether there has been a breach of transfer pricing regulations.


It's more the reasons for doing it. This looks awfully like an artificial transaction designed solely to circumvent the provisions of FFP.
Click to expand...
Transactions within a group are more usually at book rather than market value.

If the companies are part of the same group why would HMRC care? They'll only give a toss if the transaction somehow reduces the overall tax owed, which on the face of it it shouldn't.

As for the EFL, it should just be a question of funding. If owners want to put in equity they should be allowed to do that. But if Topco is getting loaded with debt here so it can pass this as 'profits' down to the club, that does need looking at.
 
Arcas Left Peg said:
about how they bought Pride Park.

The owner used a separate company to buy it for £80m when it was listed on their books as an asset worth £41m, potentially saving them from falling afoul of the league financial stability rules
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I am sure the EFL gave Derby the ok initially when this deal went through and is the reason clubs like boro last season were complaining to the efl as it was clear what they had done. There was a lot going on behind the scenes last season about this with championship clubs but I think the EFL kept trying to sweep it under the carpet as they know they fucked up.

Boro I think will be trying to sue the EFL or something like that as Derby beat them to the playoff spaces by cheating so they could say they lost out of an opportunity for earning extra money and chance of promotion.
 
homeless kid said:
The man city stuff stinks.

Etihad this, etihad that...

They've spent so much money, basically they've done what I used to do on Chapman 97/98 when you had a cheat to get unlimited money.

Even on a computer game I felt guilty about doing it.

I'm sure a lot of the mcfc fans, particularly those who were there in their 3rd tier days, have mixed feelings about it all
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To be fair mate I have supported safc in our 3rd tier days and I won’t feel guilty at all if we spend billions and win something during my lifetime.
 

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