Chelsea transfer strategy hit after Premier League agrees amortisation cap
Chelsea’s transfer strategy has been undermined after Premier League shareholders voted to cap amortisation at five years.
Contract amortisation – an accounting practice of writing off gradually the initial cost of a player over the course of their contract – was on the agenda when clubs met on Tuesday and they agreed for the Premier League to fall in line with Uefa on the issue.
Chelsea’s owners, Todd Boehly and Clearlake Capital, have looked to spread the cost of transfers across up to eight years. It is understood, though, that they backed the change, which will apply to new and extended contracts. A motion needs the support of 14 clubs to be passed.
A relief for Chelsea is that the new policy was not backdated to last summer. There was so little support for such a move that it was not put to a vote. Chelsea spent more than £400m on signings then and broke the British transfer record when buying Moisés Caicedo from Brighton for £115m.
Boehly and Clearlake have handed out eight-year deals since buying Chelsea from Roman Abramovich. That has allowed them to spread payments for transfers over a long period, which helps from a financial fair play perspective. But Uefa closed the loophole last summer, with clubs restricted to amortising deals over five years under its rules. It remains possible to hand out longer deals but Chelsea would be expected to adjust amortisation if they were in European competition.
The move was not backdated by Uefa. Chelsea subsequently bought Caicedo, giving the midfielder an eightyear deal. The league’s profit and sustainability rules permit clubs to make a loss of £105m over a three-year period, with adjustments made for Covid.
Chelsea posted a loss of £121m in their most recent accounts and are being investigated by the league and the Football Association after reporting that “incomplete financial information” had been submitted during Abramovich’s tenure. Uefa has fined the club £8.6m over the admission.
Clubs also approved a rule amendment to place teams under a transfer ban if they owe “a transfer debt to another Premier League or EFL club … until the outstanding payment has been made”.
A league statement said: “The board can also have the option to deduct the amount from the club’s entitlement to the league’s central funds.”
The meeting also revisited the so-called “new deal” for football. After a deal failed to be approved at the league meeting a month ago, resolution remained out of reach on Tuesday as clubs debated possible solutions.
Among 20 clubs there are divergent opinions on two key aspects of any deal: how to pay for it and how to structure cost controls that are an agreed condition.
Some of the smaller clubs have argued that even cost controls that allowed spending on players to reach as much as 85% of revenue would not keep them afloat in the Championship in the event of relegation.
There was also a debate over how to split projected costs. With the league having agreed a top-level sum of £358m to be distributed to EFL clubs over three years, two mechanisms have been proposed for dividing the total: a levy on transfers or an extension of the funding model used currently for “solidarity payments” (where each club contributes the same amount from their TV revenues).
While tThe models were discussed, with a possible combination of the two also on the table, but no agreement was forthcoming and the league will seek to revisit the issue in January.