Chelsea banned from using transfer loophole exploited by Todd Boehly
Uefa has officially closed the amortisation loophole that Chelsea owner Todd Boehly exploited to spend vast sums on transfers while remaining within the limits of financial regulations.
Boehly’s clever accounting tactic involved offering long contracts to new signings, enabling the club to spread the cost of the transfer over the length of the contract, as previously permitted in Uefa’s rules.
The £88m cost of signing Mykhailo Mudryk could therefore be split over his eight-and-a-half year contract meaning only £10.35m had to be registered as expenditure in the club’s accounts each year.
The American billionaire has overseen transfer expenditure of more than half a billion pounds since he took over at the west London club last year and the old amortisation rules aided the process.
Uefa, however, has moved to stop the practise in order to “improve financial sustainability” in the game. On Wednesday the governing body’s decision-making Executive Committee met at the House of European Football in Nyon, Switzerland, and agreed to amend the existing amortisation accounting regulations.
The new rules come into effect on 1 July and do not affect transfers that took place prior to the amendment. Under the changes, clubs are still permitted to sign players on long-term contracts but can only spread the cost of the transfer across a maximum of five years.
Why amortisation is a ‘clever but risky’ move
Chelsea have spent over £600m since the Boehly-led takeover (Photo: AP)
By Mark Douglas
Speaking in the wake of Mudryk’s move to Chelsea in January, football finance expert Kieran Maguire explained how amortisation is a clever but risky manoeuvre.
“It is the difference between buying one player on a big contract or bringing in two or three,” Maguire said. Chelsea are committing substantial wage packages on players they will be “stuck with” if they fail to perform.
“It’s a substantial investment in their potential but also the club’s ability to maximise that potential.
“It protects Chelsea if the player does well and Real Madrid start sniffing around them but they risk being stuck with them if it doesn’t work out. We all remember Winston Bogarde sitting on a long contract but never playing.”
Chelsea’s recent success means they always had the capacity to spend big when Clearlake took over.
Uefa’s new rules, introduced next season, limit club spending to 70 per cent of revenue. They are only allowed permitted losses of just under £50m over a three-year period but Chelsea’s most recent losses over a three-year period were just £5m.
“They had plenty of room to work in because Todd Boehly bought a successful club,” Maguire said.
“Chelsea won the Champions League in 2021 and the European Super Cup. That’s £119m in additional revenue, along with the sales of Fikayo Tomori and Tammy Abraham, which brought in £70m.”
“For FFP and accounting reasons, [player trading] is key,” Maguire says.
“If you sell a player, profits are calculated in the accounts immediately but if you buy a player it’s calculated over the length of their contract.”
In order to comply with financial regulations, Chelsea have been offloading a vast number of players this summer. N’Golo Kante, Edouard Mendy, Kalidou Koulibaly and Hakim Ziyech have all either left or agreed to join Saudi Pro League sides.
The club are locked in talks with Manchester United over a deal for Mason Mount, who has one year remaining on his contract. United do not want to increase their offer above £55m and are hoping to reach an agreement with Chelsea this week.
Inter Milan are interested in Romelu Lukaku, while AC Milan are expected to sign Ruben Loftus-Cheek and are exploring a deal for Christian Pulisic.
Uefa said: “The amortisation of the player’s registration will be limited to five years in order to ensure equal treatment of all clubs and improve financial sustainability. In case of contract extension, the amortisation can be spread over the extended contract period but up to a maximum of five years from the date of the extension.
“Such a change will not restrict the way in which clubs operate (i.e. clubs that are allowed by their national governing bodies to conclude player contracts for a period exceeding five years can continue to do so) and will not apply retroactively to transfer operations that have already taken place.”
Uefa has also acted to try to prevent clubs inflating transfer fees in “swap” deals, whereby a player is included in a deal to sign a player from another club.
Uefa’s statement added: “With regard to the player exchange transactions, the regulation specifies that it is the responsibility of the clubs to assess whether a transfer operation should be qualified as a swap, in which case it shall be accounted for in line with the international accounting standards. This approach aims at dissuading that transfer operations take place with the sole intent to artificially inflate transfer profits rather than for sporting purposes.
“It is now required that clubs’ auditors confirm the correct application of the described accounting requirements and report any discrepancy should this not be the case.”
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