Championship clubs say the deal struck with the Premier League to see them through the covid crisis will benefit teams that have failed to pay the tax man, not well-run organisations in need of replacing lost revenue.
Under the terms of a bailout agreed with the EFL, second tier clubs will be able to apply for a loan of up to £8.33 million each, but only to pay off PAYE tax debts.
Some clubs point out that they have kept up with their payments to HMRC, despite having lost millions of pounds after fans were banned from stadiums.
On the other hand, say the clubs, some teams that have chosen to spend on transfers and wages in the pursuit of promotion and run up debts to the tax man, as a result, will receive help.
Rotherham United are concerned that they will not receive help under the bailout deal
By the end of November, Championship clubs had amassed £59m in tax debts and that figure is still rising.
‘We are very disappointed,’ said Dave Boddy, chief executive at Coventry City, which is due to clear its own tax debt this month. ‘This deal does nothing for us.’
However, the coronavirus pandemic has stripped the club of income, costing an estimated £3 million in lost revenue.
‘We have a financial need to replace the cash we are losing in order to pay the wages,’ added Boddy. ‘The cash runs out down the line. We need the ability to have unconditional support.
Coventry City chief executive, Dave Boddy, (left), said his club would not benefit from the deal
‘One way out of it is to trade our way out,’ said Boddy, which means selling players.
‘We will get ownership support,’ he added. ‘That is the only way we are going to find it.’
Boddy has been a strong advocate that government should provide clubs with financial support, since it has bailed out other sports and sectors that have suffered as a result of a ban on fans and audiences.
The EFL bailout, announced on Thursday, will provide £50m in grants and conditional grants to clubs in League One and Two and a £200m loan facility for Championship sides.
How the rescue package works
Support for Clubs in League One and League Two
The relief package will provide a combined fund of £50m for League One and League Two, with £30m to be paid to all 48 clubs as a grant and a further £20m available on application as a ‘monitored grant’.
A £30m grant to be paid immediately from the Premier League to EFL clubs for distribution based on lost gate receipts in respect of the 2019/20 and 2020/21 season.
Each club will receive a minimum payment of £375,000 in League One and £250,000 in League Two.
The remaining £15m to be distributed using a lost gate revenue share calculation, which will be approved by both the EFL and the Premier League.
In addition, a further £20m ‘monitored grant’ is to be provided with clubs able to apply for it based on ‘need’, with a joint EFL and Premier League panel to determine club eligibility.
Clubs subsequently in receipt of a ‘monitored grant’ will be subject to certain restrictions, in respect to transfer spend and player wages.
Clubs who keep to the restrictions will not have to repay any of the funding required, whereas for clubs in breach, the ‘monitored grant’ becomes repayable by the club.
Any club in receipt of a grant or monitored grant payment will be required to continue to maintain compliance with the EFL’s financial regulations.
Support for Championship Clubs
The Premier League has also agreed to provide a payment commitment of up to £15m to cover interest, arrangement fees and professional fees to allow the EFL to secure a £200m loan facility that it will then on-lend to Championship clubs interest free.
The loan facility is provided to support clubs in the Championship to meet PAYE liabilities up to the end of 30 June 2021.
Loans are capped at £8.33m per Championship club with monies received to be repaid by June 2024 using Premier League solidarity receipts or other central Premier League or EFL Distributions.
This fund is not available to any club in breach or suspected breach of EFL regulations and clubs will again need to submit evidence in their applications to club eligibility.
Any club in receipt of a loan payment as detailed will be required to continue to maintain compliance with the EFL’s financial regulations.
EFL clubs are reliant on match day income so the ban on fans has hit them hard financially
The lower league grants are aimed at, in part, replacing revenue lost as a result of the coronavirus pandemic.
But ‘the loan facility is provided to support clubs in the Championship to meet PAYE liabilities up to the end of 30 June 2021’ accrding to the EFL/Premier League statement explaining the package.
PAYE – or employment taxes – are a huge cost to larger football clubs. In the Championship, total employment taxes paid by clubs are estimated to be around £270m on an annual wage bill of £850m in 2019.
‘I can understand the beef that clubs have,’ said Kieran Maguire, a lecturer at the University of Liverpool and expert in football finance.
The Premier League has agreed a rescue package for the EFL worth £250m
‘Those who have paid their taxes on time get nothing and those who have not get help.
‘It looks somewhat flawed.’
Barnsley co-chairman Paul Conway told The Athletic: “The loan is not well structured as it rewards clubs the most that have not been paying their bills, including payments to the government.
“At Barnsley, we are one of the few clubs in the EFL which have paid players 100 per cent on time during the pandemic; have paid PAYE on time etc, so the only way we could access it is to stop paying PAYE for the rest of the season.’
Coventry City were allowed a tax holiday earlier this year and will clear that debt this month
Rotherham United is another club that is suffering because of the pandemic, but fears it is not eligible for the loan scheme.
The club estimates it has also lost £3m through having no fans at matches, as well as the loss of hospitality and sponsorship income, but it has kept up with its tax payments.
‘Like Leagues One and Two, we are suffering because of the lack of commercial enterprise and I would like to see that we have the opportunity to get help,’ said Rotherham’s owner, Tony Stewart.
Stewart said there will be a ‘robust’ debate when EFL clubs meet virtually to discuss the bailout on Tuesday, as they try to work out the implications of the deal.
Rotherham United owner Tony Stewart would like support for lost income from the pandemic
‘We do not want to just bail out clubs in dire straits that have overpaid players or paid for transfers with money they have not got,’ added Stewart.
While Stewart is focused on the bailout, his true passion is reform of the governance of the game so that the wealth is routinely distributed more fairly.
While the covid crisis has pushed some EFL clubs to the brink of viability, some were already flirting with financial disaster.
Rotherham’s New York Stadium has not been able to welcome fans since March
A report earlier this year revealed Championship clubs’ wage bills, are on average, 107% of their income.
The average player’s salary in the Championship is now more than £800,000, driven upwards by the money coming into the division through parachute payments to clubs relegated from the Premier League of £90m over three years.
The Premier League is currently undertaking a review of governance and other groups’ including the Football Supporters’ Association and a campaign group led by former Manchester United defender Gary Neville, are calling for independent regulation of the sport.
Rick Parry, chairman of the EFL ( left) and the Premier League’s chief executive Richard Masters (right) worked togther on a deal to support the Championship, Leagues One and Two
Speaking of the bailout after it was announced, Rick Parry, chairman of the EFL said: ‘Our over-arching aim throughout this process has been to ensure that all EFL clubs survive the financial impact of the pandemic.
‘I am pleased that we have now reached a resolution on behalf of our clubs and as we have maintained throughout this will provide much needed support and clarity following months of uncertainty.’
And welcoming the deal on Thursday, Premier League chief executive, Richard Masters, said: ‘The Premier League is a huge a supporter of the football pyramid and is well aware of the important role clubs play in their communities. Our commitment is that no EFL club need go out of business due to COVID-19.’