Is there a way around the ffp

[Babylon]

It's the whole "we" and "them" thing again. There is no us and them, it is them and them. Every penny of debt they accumulate as owners of the club is another penny the future owners will take off the purchase price. If the owners charge themselves rent on the stadium, they gain nothing except perhaps some tax advantage or other.

Well that depends on whether they stick around or not. If they decide to stick around and why wouldn't they now they are going to run the club on only what it makes. Then the club will be profit making rather than loss making for them.

 

If LCFC pays AFI £1.5m a year rent AFI will have their costs met in 11 years and they will still own the stadium. Similarly the debt they could sit there and cream off their 8% if they wanted to for the next 100 years.

[MooseBreath]

Well that depends on whether they stick around or not. If they decide to stick around and why wouldn't they now they are going to run the club on only what it makes. Then the club will be profit making rather than loss making for them.

If LCFC pays AFI £1.5m a year rent AFI will have their costs met in 11 years and they will still own the stadium. Similarly the debt they could sit there and cream off their 8% if they wanted to for the next 100 years.

They own the club, if the club is making profit, it's theirs to do what they want with. But what the owners of a football club should do with profits is a different, and much less worrying conversation than whether or not they're putting the future of the club at risk, which is what is often alluded to on here.

[artursteppe]

Maybe we could take on board the bizarre idea that the owners are investing in the club to make it bigger and more successful and thereby more profitable so that they as owners can reap their reward and us as football supporters can support and be proud of our club's successes and enjoy every moment of better times in the future. Just a thought of course. On the other hand maybe a lot of you cynics are absolutely right to believe they are using a lot of contrivance, planning and effort to do the opposite.

[Leicester_Numan]

I've said it before. Just look at the Manchester City situation.

Signed a deal with Eithad for the Ground naming rights & shirt sponsor, I believe the deal was in the region of £400M for 10 years/seasons. So roughly that's £40M per yer/season they will recieve. I wonder if our club have thought about doing something similar with King Power Holdings?

That was one of the things FFP was intending to stop. Anything like that will be looked at by committee and is so obvious it can't hope to get past them

[5waller5]

the 8% interest thing really is being used as a tool against the Thais and it really shouldn't be.

 

It's just reasonable tax planning that's all......

 

Let's say they lend the club £1,000.

 

The club then earns £1000 and spends £900 as the expenses of running the club.

 

Profit £100.

 

Under our tax regime they'd pay 50% .... so £50 to the taxman and £50 to them.

 

.................

 

Now charge 8% (the maximum the taxman will allow without raising an eyebrow and having something to say about it)......

 

£1000 x 8% = £80

 

Same as above £1000 earn, £900 plus £80 spent.

 

Profit £20.

 

There you go Mr Taxman here's your £10.

 

Saving £40 in tax.

 

This is highly simplified and if before an accountant starts ripping apart my figures - just to illustrate the principal.

 

I'd be worried if they weren't charging 8% on their loan to the club ..... and I'd be worried if they gifted the club the money not loaned it. That would point to them being clueless business people .... the way they are doing it gives me comfort they understand business.

[Babylon]

the 8% interest thing really is being used as a tool against the Thais and it really shouldn't be.

 

It's just reasonable tax planning that's all......

 

Let's say they lend the club £1,000.

 

The club then earns £1000 and spends £900 as the expenses of running the club.

 

Profit £100.

 

Under our tax regime they'd pay 50% .... so £50 to the taxman and £50 to them.

 

.................

 

Now charge 8% (the maximum the taxman will allow without raising an eyebrow and having something to say about it)......

 

£1000 x 8% = £80

 

Same as above £1000 earn, £900 plus £80 spent.

 

Profit £20.

 

There you go Mr Taxman here's your £10.

 

Saving £40 in tax.

 

This is highly simplified and if before an accountant starts ripping apart my figures - just to illustrate the principal.

 

I'd be worried if they weren't charging 8% on their loan to the club ..... and I'd be worried if they gifted the club the money not loaned it. That would point to them being clueless business people .... the way they are doing it gives me comfort they understand business.

You're a tax man aren't you!!!!! Booooooooo.

[Monsell1976]

Maybe we could take on board the bizarre idea that the owners are investing in the club to make it bigger and more successful and thereby more profitable so that they as owners can reap their reward and us as football supporters can support and be proud of our club's successes and enjoy every moment of better times in the future. Just a thought of course. On the other hand maybe a lot of you cynics are absolutely right to believe they are using a lot of contrivance, planning and effort to do the opposite.

Tend to agree with your post, people slate them for not having knowledge of how running a football club works, they have got people in place now, and they would probably admit they have made some mistakes, and things haven't quite gone to plan, it's also been suggested they have only achieved success in business due to back hang favours from high powered friends to dominate the duty free in Thailand.

I would suggest these people are honourable, and when they say they are here for the long haul,I believe them, and I would suggest that they are clever business men, and if there is a way of investing under ffp, they will invest more when they are ready.

Without turning this into an anti Pearson thread, but it maybe a case that they may not be convinced with the current management/ coaches, they may just be taking a step back and see how the season pans out, and if things are going well by say jan, they may invest, if not come the end of the season alot of high earners and the managers reported million a year will be off the books, so they may wait to invest in a new man and new ideas.

I just think as fans we have just got to have faith that there gonna get it right, and hope we go up this season as financially thinks will look alot better once in the premier league, even if we don't stay there and live off the parachute payments.

I don't profess to know about the workings of the clubs finances or ffp, just some thoughts.

[5waller5]

You're a tax man aren't you!!!!! Booooooooo.

 

 

And you get the hump with me calling you Mrs P!!!!!!!! 

 

That's WAY worse!!!!! 

[5waller5]

Tend to agree with your post, people slate them for not having knowledge of how running a football club works, they have got people in place now, and they would probably admit they have made some mistakes, and things haven't quite gone to plan, it's also been suggested they have only achieved success in business due to back hang favours from high powered friends to dominate the duty free in Thailand.

I would suggest these people are honourable, and when they say they are here for the long haul,I believe them, and I would suggest that they are clever business men, and if there is a way of investing under ffp, they will invest more when they are ready.

Without turning this into an anti Pearson thread, but it maybe a case that they may not be convinced with the current management/ coaches, they may just be taking a step back and see how the season pans out, and if things are going well by say jan, they may invest, if not come the end of the season alot of high earners and the managers reported million a year will be off the books, so they may wait to invest in a new man and new ideas.

I just think as fans we have just got to have faith that there gonna get it right, and hope we go up this season as financially thinks will look alot better once in the premier league, even if we don't stay there and live off the parachute payments.

I don't profess to know about the workings of the clubs finances or ffp, just some thoughts.

 

I think all of that is very possible and am with you .... I think honour is very high on their priorities.

[Babylon]

And you get the hump with me calling you Mrs P!!!!!!!! 

 

That's WAY worse!!!!! 

True... apologies.

[Guest MattP]

I'd be worried if they weren't charging 8% on their loan to the club ..... and I'd be worried if they gifted the club the money not loaned it. That would point to them being clueless business people .... the way they are doing it gives me comfort they understand business.

 

Yeah the Man City and Chelsea fans must be absolutely devastated they have bad businessmen showering them with money and not taking any interest off them.

[wurmer]

Probably, sponsorship. I just don't think the Thais can be bothered throwing money at the club again, especially while the wage bill is so high, they aren't a bottomless pit.

 

This is a way around it - Thai's don't want to do that, it's throwaway money.

All the money invested by the Thai's has  either been in Capital (stadium) or loans - i.e. they want their money back at some point - and loans do fall under FFP.

[5waller5]

Yeah the Man City and Chelsea fans must be absolutely devastated they have bad businessmen showering them with money and not taking any interest off them.

 

 

And do you know the ins and outs of their accounts??? Do you know for a fact they aren't charging interest?? If they're not then they must just love paying tax.

[Guest MattP]

And do you know the ins and outs of their accounts??? Do you know for a fact they aren't charging interest?? If they're not then they must just love paying tax.

 

Man City even cover their players 45% tax not only the business tax the clubs pays.

 

Considering Chelsea's accounts are virtually back in the black I think it would be safe to assume Roman isn't taxing the club to help himself.

[5waller5]

Man City even cover their players 45% tax not only the business tax the clubs pays.

 

Considering Chelsea's accounts are virtually back in the black I think it would be safe to assume Roman isn't taxing the club to help himself.

 

 

I don't know anything about either club's finances so can't comment ...... But when you're nearly in the black that's the most likely point to start taking the payback .... no owner in their right mind actually wants to make a profit ..... that simply gets given to the tax man .... you may as well run at a small loss and be skimming the money out .... in loan repayments (not interest) for example. 

[Guest MattP]

I don't know anything about either club's finances so can't comment ...... But when you're nearly in the black that's the most likely point to start taking the payback .... no owner in their right mind actually wants to make a profit ..... that simply gets given to the tax man .... you may as well run at a small loss and be skimming the money out .... in loan repayments (not interest) for example. 

 

Of course you want to make a profit, that's the whole idea of a business. The Thais arent going to throw 90million away in loans just so they can avoid paying a bit of tax.

 

"Skim the money out?" These are professional football clubs, not shady 1970's casinos in Bermuda.

 

You don't pay 100% tax on profits you know. No business in the World would function if that were the case.

[5waller5]

Of course you want to make a profit, that's the whole idea of a business. The Thais arent going to throw 90million away in loans just so they can avoid paying a bit of tax.

 

"Skim the money out?" These are professional football clubs, not shady 1970's casinos in Bermuda.

 

You don't pay 100% tax on profits you know. No business in the World would function if that were the case.

 

 

you know best.

 

What you actually do as a business is optimise your tax position and your balance sheet ... if you need to get loans you make profit and declare those profits so you can borrow money cheaply ... we don't need to .... so they'd be looking to extract the money from the business in the most tax efficient manner ... sorry for my sloppy use of "skimming" .... was merely a way to explain that a profit realises a tax bill ... so any sane business person would break even for a good few years after making such significant investment - it would be artificially breaking even as they would be taking the profits out of the club upto the point of making a tax bill.

 

If you do it differently then I've got the name of a good accountant you need.

[5waller5]

Of course you want to make a profit, that's the whole idea of a business. The Thais arent going to throw 90million away in loans just so they can avoid paying a bit of tax.

 

"Skim the money out?" These are professional football clubs, not shady 1970's casinos in Bermuda.

 

You don't pay 100% tax on profits you know. No business in the World would function if that were the case.

 

 

In fact ... this is such a stupid reply I wonder if you actually read any of my post at all.

[Guest MattP]

you know best.

 

What you actually do as a business is optimise your tax position and your balance sheet ... if you need to get loans you make profit and declare those profits so you can borrow money cheaply ... we don't need to .... so they'd be looking to extract the money from the business in the most tax efficient manner ... sorry for my sloppy use of "skimming" .... was merely a way to explain that a profit realises a tax bill ... so any sane business person would break even for a good few years after making such significant investment - it would be artificially breaking even as they would be taking the profits out of the club upto the point of making a tax bill.

 

If you do it differently then I've got the name of a good accountant you need.

 

I''m AAT qualified and one year from finishing CIMA. My own business doesn't really have outgoings so converting debt to equity isn't one of my specalist points.

 

No expert on Business tax but I know people generally don't plough 90million then charge an interest rate on it to improve their rate of tax, how much tax do you think they are paying on the interest being extracted?

You only want to be breaking even over the first few years of a business if you have been been financed by a private equity group or something similar, this is an ownership so it makes no sense whatsoever to intend to break even for "tax reasons". To try and brush off the 8% as them doing us some sort of favour is laughable.

 

In fact ... this is such a stupid reply I wonder if you actually read any of my post at all.

 

You call my reply stupid and then use quotes like "a profit realises a tax bill" which means absolutely nothing at all and makes no sense whatsoever.

[5waller5]

I''m AAT qualified and one year from finishing CIMA. My own business doesn't really have outgoings so converting debt to equity isn't one of my specalist points.

 

No expert on Business tax but I know people generally don't plough 90million then charge an interest rate on it to improve their rate of tax, how much tax do you think they are paying on the interest being extracted?

You only want to be breaking even over the first few years of a business if you have been been financed by a private equity group or something similar, this is an ownership so it makes no sense whatsoever to intend to break even for "tax reasons". To try and brush off the 8% as them doing us some sort of favour is laughable.

 

 

You call my reply stupid and then use quotes like "a profit realises a tax bill" which means absolutely nothing at all and makes no sense whatsoever.

 

Thank goodness you don't work for me.

 

A profit doesn't attract tax??? What year do they teach you about corporation tax?

 

It's very simple ......

 

They have lent the club alot of money ..... they charge alot of interest and increase that debt. Therefore they have a whopping big Director's loan account .... and they can take that money out instead of income.

 

If they make £10m profit next year you can be sure they'll repay £9.9m of the loans to the club .... otherwise they'll be paying £3.2m to the tax man they didn't need to.

 

No need to mention VCs or anything else to make it more complicated. it's very very simple business. Nothing "laughable' about it. All very basic.

[Spiritwalker]

In answer to the original question, all the obvious dodges like the owners paying inflated amounts for sponsorship

are covered by ffp.

Watford do however seem to have found a way around it. Own a foreign club, then loan players from that club

or sign them at discounted fees.

[jamesmilner]

FINANCIAL FAIR PLAY . the answer is in the name . the sponsor a stand or the chairman buys a special balti pie for millions is bullshit . there is a committee that will be called to investigate such unfairness . if found guilty of unfairness the penalties are harsh . its just not worth the try as it could back fire immensely .

[Guest ttfn]

Thank goodness you don't work for me.

A profit doesn't attract tax??? What year do they teach you about corporation tax?

It's very simple ......

They have lent the club alot of money ..... they charge alot of interest and increase that debt. Therefore they have a whopping big Director's loan account .... and they can take that money out instead of income.

If they make £10m profit next year you can be sure they'll repay £9.9m of the loans to the club .... otherwise they'll be paying £3.2m to the tax man they didn't need to.

No need to mention VCs or anything else to make it more complicated. it's very very simple business. Nothing "laughable' about it. All very basic.

If they make £10 million profit next year the amounts they've loaned are irrelevant. It'll be swallowed up in historical losses.

[Guest MattP]

Thank goodness you don't work for me.

 

A profit doesn't attract tax??? What year do they teach you about corporation tax?

 

It's very simple ......

 

They have lent the club alot of money ..... they charge alot of interest and increase that debt. Therefore they have a whopping big Director's loan account .... and they can take that money out instead of income.

 

If they make £10m profit next year you can be sure they'll repay £9.9m of the loans to the club .... otherwise they'll be paying £3.2m to the tax man they didn't need to.

 

No need to mention VCs or anything else to make it more complicated. it's very very simple business. Nothing "laughable' about it. All very basic.

 

Can you explain this theory in a bit more depth?

 

How can they "repay loans to the club?" The club is the debtor to the Thais.

[Jace]

Lets not forget the ownership of the club has recently been secured within the King Power holdings so I understand why some of you are concerned but in all honesty the owners couldn't do any more to show it is very secure. As for the loan I do agree with 5waller5 the club also has to give a legit rate when lending otherwise the club would be subject to tax evasion potentially I think.