The Premier League has written to its clubs to clarify its rules regarding the fair valuation of players involved in transfers after “a significant number requested clarification” following recent swap deals.
Earlier this week BBC Sport revealed that at least one club intended to raise the issue with the Premier League.
It came amid concerns some clubs may be looking to sell each other players in order to exploit a potential loophole in Profit & Sustainability Rules (PSR), which limit losses, before an accounting deadline on Sunday.
In the letter the Premier League warns that part of a transfer fee would have to be returned by the selling club if it decides a fee has been “inflated”.
Academy products Tim Iroegbunam and Lewis Dobbin were exchanged in separate deals between Everton and Villa for a reported £9m each. Then BBC Sport reported Villa were close to selling another academy youngster – teenager Omari Kellyman – to Chelsea for a reported £19m.
Next, there was confirmation that going the other way is Chelsea’s homegrown Dutch defender Ian Maatsen for £37.5m, in another separate transaction.
There is no suggestion that any of the clubs involved have breached any rules.
When a club sells a player, any profit is recorded in its entirety in that year’s accounts, with homegrown academy players generating ‘pure’ profit.
In contrast, the amount paid by the buying club is spread out – using an accounting practice called amortisation – over the length of the contract.
So if two clubs agree to sell players to each other, especially academy players, it could provide a significant financial boost.
In the letter – which has been seen by BBC Sport – clubs are warned by the league’s director of governance that if it identifies “a scenario where a selling club has received an inflated transfer fee for a player in a transaction not considered to be conducted at arm’s length, the selling club would be required to return the amount in excess of fair market value back to the buying club.”
Clubs are also reminded that they could also be “requested to provide information and evidence to assist determination of whether the transaction should be considered as being conducted at arm’s length”.
If it is not, “a fair market value assessment of the transfer to determine the value the transaction can be approved at will take place”, the letter explains.
It adds: “If the board concludes that the transfer is not at fair market value, it will require that the value be restated.”
Clubs are also told that “officials and directors should remain cognisant of their wider legal and regulatory obligations regarding financial practices and the implications of failing to meet these obligations.”