Derby facing EFL investigation over "financial irregularities"

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Grumpy Old Man said:
The Man City thing was a bit similar, but related to overvaluation of the sponsorship contract beyond what any third party would be likely to pay.
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That's opinion, not fact. The whole FFP regime was designed to keep certain clubs out of the rich clubs trough and had nothing to do with protecting smaller clubs from debt..Y
 
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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 it was the profit was placed in a loss-making company where it could be offset against available tax losses brought forward. As the sale was made to a connected company, they could suggest that the transaction was artificial, and thus disallowable. Any price manipulation which results in a lower tax take than might otherwise have been the case can be investigated. Helping multi-national companies ensure they complying properly with transfer pricing regulations is a major earner for many tax specialists.
Marv said:
That's opinion, not fact. The whole FFP regime was designed to keep certain clubs out of the rich clubs trough and had nothing to do with protecting smaller clubs from debt..Y
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I was referring to the specific case that was brought against City for breaching those regulations.
 
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3.142 said:
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.
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Valued in 2017, and stated to have been done that year - I find it implausible that the fair value would have risen by £24m in 12 months. £56m is the cost shown as disposed in the 2018 accounts.
andymcnish said:
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.
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The notes to the accounts are pretty vague. There is a newly established holding company (formed in June 2018, just before the year end, and thus obviously hasn't filed any accounts yet. To date it has about £3.2m in share capital, paid for by the transfer of shares in the previous holding company from Mel Morris (who owns 100% of the new holding company). The previous holding company (the not very off the shelf Sevco 5112 Ltd), does have a share premium of £51.2m, but it 's impossible to tell if there's a similar SPA in Gellaw 203 (the new, similarly unimaginatively named, holding company). What will result will be a capitalised asset in the holding company and capital profit in the holding company. You see what I mena about murky.

The related party note merely says that sales of £81m were made to companies under common ownership. They are silent as to whether those companies are intra-group, or to another of Morris's companies.

The EFL only allows equity investments of up to £8m/year to be used against FFP loss limits, though there seems to be nothing to stop owners putting in more - any excess will simply not count for FFP purposes. This looks more like an attempt to move profit into DCFC to circumvent those equity restrictions.
 
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Grumpy Old Man said:
Not if it was the profit was placed in a loss-making company where it could be offset against available tax losses brought forward. As the sale was made to a connected company, they could suggest that the transaction was artificial, and thus disallowable. Any price manipulation which results in a lower tax take than might otherwise have been the case can be investigated. Helping multi-national companies ensure they complying properly with transfer pricing regulations is a major earner for many tax specialists.


I was referring to the specific case that was brought against City for breaching those regulations.
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Thanks for the explanation.

I should know this stuff, I've got a tax planning icaew exam in december
 
Marv said:
That's opinion, not fact. The whole FFP regime was designed to keep certain clubs out of the rich clubs trough and had nothing to do with protecting smaller clubs from debt..Y
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correct, it was the big team establishment making sure we don't get another City or Chelsea situation
nyron4england said:
don't see the issue tbh. loads of clubs don't own their ground.
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it's the fact the sold it at a far higher price than it's value to get around losses, which is against FFP
 
blue monday said:
So the EFL are worried that the Derby owners are putting money into their club, but they were quite happy to allow Steve Dale to buy Bury, even though 43 out of his 51 previous companies had gone into liquidation. Maybe they need to change their priorities
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Yep, it's almost like these rules encourage tinpot owners.
 
cbwhu said:
correct, it was the big team establishment making sure we don't get another City or Chelsea situation

it's the fact the sold it at a far higher price than it's value to get around losses, which is against FFP
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so fuck. clubs get unfair advantages all the time until it goes against them. far too much whining and crying going on now.
 
nyron4england said:
so fuck. clubs get unfair advantages all the time until it goes against them. far too much whining and crying going on now.
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like the thread on here moaning that Bolton were signing players? rules are rues if they are there and broken then something should be done or there's no point having them
 
Think some on this thread are confusing selling stadium naming rights and selling the actual stadium.

nyron4england said:
so fuck. clubs get unfair advantages all the time until it goes against them. far too much whining and crying going on now.
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Aye the rest of the teams in the league should be happy some clubs are breaking rules they all agreed on. Why even mention it.
 
Kevsgreat said:
Think some on this thread are confusing selling stadium naming rights and selling the actual stadium.


Aye the rest of the teams in the league should be happy some clubs are breaking rules they all agreed on. Why even mention it.
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what if the rules themselves are a load of shit? i mean, you can only spend a percentage of what you make? sound for all the clubs in London compared to Burton.
cbwhu said:
like the thread on here moaning that Bolton were signing players? rules are rues if they are there and broken then something should be done or there's no point having them
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see above
 
nyron4england said:
exactly. what rule have they actually broken? or did they find a loophole?
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you can't value something either sold or sponsored at something clearly above the market value, to stop thing like Man City owners sponsoring their own tea shack for 150m a year

so they have sold a stadium worth 40m for 80m
 
cbwhu said:
you can't value something either sold or sponsored at something clearly above the market value, to stop thing like Man City owners sponsoring their own tea shack for 150m a year

so they have sold a stadium worth 40m for 80m
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is that an EFL rule?
 
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