Sheffield Wednesday: The FFP Hillsborough sale 'loophole' explained - how it was opened and why the EFL are trying to close it

The £60m stadium sale – to another company owned by owner Dejphon Chansiri – has led to charges being brought against the club, who stand accused of manoeuvring their accounts in order to stay within the confines of so-called ‘profit and sustainability’ rules and could face a points deduction.

These rules allow clubs are allowed to record a pre-tax losses of up to £39m on a rolling three-year basis. Without the sale of Hillsborough, submitted as having taken place during the 2017/18 season, Wednesday losses for the period of the 2015/16 – 17/18 would have totalled somewhere in the region of £57m.

But the sale of Hillsborough to another Chansiri-owned company is not the aspect under question. The charges centre on the circumstances of when the stadium was sold and the fact that it was included in the 2018 accounts despite cash having only been transferred a year later – and only in instalments.

There are also question marks over why the stadium was not correctly registered with the Land Registry until over a year after the apparent sale and how the property could have been purchased by a company that did not formally exist at the time of the sale.

Sheffield Wednesday have denied the charge and on Thursday released a short statement saying the charges will be ‘vigorously defended’ by the club.

The sale of a major asset such as a stadium has been widely described as a ‘loophole’ used by clubs to sidestep FFP headaches and has been carried out previously by Wednesday’s Championship rivals Derby County and Aston Villa.

Football finance expert Kieran Maguire, of Liverpool University, confirmed that the so-called ‘loophole’ did not exist for EFL clubs until 2016, when a ruling excluding the sale of stadiums being included in a club’s FFP accounts was relaxed.

That’s still the situation in most of Europe, where UEFA rulings do not acknowledge the sale of stadiums in FFP calculations.

Speaking on the situation up until the rule change, Maguire said: “Chansiri could have sold it for £500m to himself, and it wouldn’t have made a blind bit of difference because the rules said that if you sell a key asset, you ignore that for FFP reasons.

“If you take a look at the UEFA version of FFP, they specifically state that stadium sale profits should be excluded from FFP because this is not in a sustainable process for a football club.

“That makes sense, if you’re selling your biggest asset purely for the regulations of Financial Fair Play, it’s indicative of a club that has financial problems. We don’t want to encourage these behaviours.

“That’s the ruling of UEFA, but in both the Premier League and in the EFL the rules were relaxed in 2016 and since that some clubs have seen that relaxation and have decided to use that a means of compliance.”

The ruling was relaxed in order to bring EFL financial regulations into line with those of the financially superior Premier League. This was necessary to ensure the Premier League would enforce EFL sanctions if a club was found to have broken EFL spending rules before achieving promotion, in theory stopping any club breaching rules to effectively ‘get away with it’ if they were promoted to the top tier.

Maguire said: “Nobody had spotted the loophole in the Premier League because realistically no one is going to need it, you make so much money there you don't need to sell the stadium to yourself.

“The EFL adopted the new rules, they didn't look at the small print, the clubs did and what Derby and Sheffield Wednesday did is just exploited the loophole.”

It emerged earlier this year that Middlesbrough were considering suing the EFL for their handling of Derby’s £81m sale of Pride Park, with Boro owner Steve Gibson comparing the alleged oversight to a referee ignoring a defender ‘picking up the ball in his own area’.

And Leeds United owner Andrea Radrizzani, speaking at the Financial Times Business of Football Summit in 2018, made clear his outrage at the situation and said: “We should revisit the rules. We were judged as a cheating club when we sent a scout to watch [Derby] training, so they should take a similar view on what I would say is greater cheating by these clubs.

“For me if it’s cheating to send a scout in a public street, what should be the punishment of selling the stadium to a sister company to increase income of the clubs?”

It is understood that the EFL are in the process of trying to close the loophole.

Last season Birmingham City, then managed by current Owls boss Garry Monk, were deducted nine points for breaching FFP rules. If found guilty, possible sanctions for Wednesday include points deductions and transfer embargoes.