Big-spending Premier League clubs will pay a levy on any overspend as part of new Squad Cost Ratio (SCR) financial rules voted in for next season.
At a shareholders meeting today in London, a vote to introduce SCR in place of the controversial Profitability and Sustainability Regulations (PSR) achieved the required majority.
They rejected proposals for top-to-bottom anchoring, which faced the threat of legal challenges and would have capped clubs’ spending to a multiple of the lowest-earning team.
SCR will limit clubs to spending 85 per cent of their football-related income on on-field costs, with fines and points penalties for those who exceed their threshold.
Those who spend up to 30 per cent more – 115 per cent of income – will pay a levy based on the amount by which they overspent.
More serious breaches will incur an automatic six-point deduction, which will be increased on a sliding scale depending on the severity of offence.
Clubs also approved plans for further financial monitoring in the form of Sustainability and Systematic Resilience (SSR) tests, which will require teams to show they are properly funded.
The new measures will be implemented from next season, with PSR to continue operating for the remainder of the current campaign.
Clubs who take part in European competitions such as the Champions League have little to fear from SCR, which Uefa already applies but at the stricter ratio of 70 per cent.
What is SCR and why was it conceived?
SCR was conceived to make it easier to invest as, unlike PSR, it only restricts spending on costs that directly impact on-field performance, like transfers and wages.
“The Premier League is introducing the SCR system to promote the opportunity for all of its clubs to aspire to greater success, while protecting the competitive balance and compelling nature of the league,” the top flight said.
“SCR focuses solely on spending that directly affects what happens on the pitch, allowing clubs greater commercial freedom to invest without restriction in off-pitch areas like stadium upgrades and fan experience.
“The system brings the Premier League’s financial rules closer to Uefa’s, ensuring consistency for clubs competing in both domestic and European competitions.
“This alignment aims to simplify dual reporting as well as ensure clubs will have as smooth a transition as possible following unexpected qualification (or failure to qualify) for Uefa competitions.
“As such, clubs will be able to invest with confidence over multiple seasons even if they move in and out of Uefa competitions.”
How the Premier League spending levy works
The levy will be calculated based on the absolute sum by which a club overspends and what that sum represents as a percentage of their allowable on-field costs.
So, a club with football-related income of £200m who spend £180m would face a fine of £500,000 – in other words, their £10m overspend multiplied by 0.05, the additional five per cent that they spent.
A club with football-related revenue of £400m who spend £440m would be fined £25m, calculated as £100m of overspend multiplied by their 25 per cent breach.