Premier League PSR loophole: Why Chelsea, Aston Villa and Everton have attracted rival clubs' anger with their transfer business

To begin, it's worth setting the scene slightly. PSR were introduced by Premier League clubs back in 2013, two years after UEFA made waves by finally introducing Financial Fair Play to its own competitions. The motion only narrowly passed, with six clubs voting against the proposals and Reading abstaining, but the system remains in place today.

On the most basic level, the rules state that clubs are not permitted to make losses greater than £105 million ($133m) over three years. It's not quite as simple as that, though. Of this £35m ($44m) per year loss, just £5m ($6m) can be the club's own money. The additional £30m ($38m) allowance can be boosted by secure funding, which is defined by Swiss Ramble as: "either an equity contribution or an irrevocable commitment to make a payment for shares." Loans from owners do not count as 'secure funding'.

There are also adjustments made for clubs who have spent time outside the Premier League during the three-year PSR accounting period. In these cases, the percentage of the losses that can be made up via 'secure funding' are less.

PSR has always been a contentious issue, as evidenced by the sizable cartel of clubs who voted against its implementation a decade ago. Financial control has become an even more fiercely debated topic in recent years, though.

There are two sides to the coin. Firstly, there is the argument that the financial controls discourage ambition. Most Newcastle fans would likely subscribe to this idea. Following their Saudi-backed takeover in 2021, the club were swiftly linked with all manner of expensive signings. And while there has been investment in the playing squad, with the Magpies returning to the Champions League last season, their rate of progress has been far slower than when Chelsea and Manchester City were purchased by well-monied owners, with both of those takeovers happened before the introduction of PSR controls.

By contrast, Newcastle are likely to have to sell at least one key player this summer in order to balance the books, with Alexander Isak and Bruno Guimaraes both linked with moves away. Aston Villa, who have also spent heavily to orchestrate a return to European football's top table, are likely to do the same. Douglas Luiz is already on his way to Juventus in a complex player-plus-cash deal, and they may be forced to sell another key asset, too.

The other side to PSR criticism stems from the punishments that have been handed out to Premier League clubs this past season for breaking the rules. In November last year, Everton were initially docked 10 points for PSR breaches for the period ending in 2022, though on appeal this was reduced to six.

A few months later, the Toffees received another two-point penalty, while Nottingham Forest have also fallen foul of the rules. The Trees had four points taken off them, with their own attempts at appeal proving unsuccessful.

Leicester are in similarly hot water. In March, the Championship winners were charged by the Premier League for PSR breaches. While they avoided any points deduction last season which might have derailed their promotion charge, the issue is still being considered, with experts suggesting that some sort of punishment is inevitable.

The timing of some of these decisions have been criticised, with the various points deductions creating unnecessary uncertainty in the relegation battle, while the severity of Everton's punishment in particular raised eyebrows. Supporters organised a string of protests last season, while Jamie Carragher was critical of the initial points deduction.

"The 10-point deduction for Everton is excessive and not right, considering they have been working with the Premier League about this for the last couple of years," he wrote on social media the time. "Would it have been better to be evasive and try and drag it out like other clubs? No doubt relegated clubs will have put big pressure on the Premier League to deal with Everton, but when you consider six clubs tried to leave the Premier League [and join the Super League] and there was no sanction at all, it doesn’t feel right."

It doesn't take a genius to work out that the "other clubs" Carragher was referring to were Manchester City and Chelsea. The former are currently facing 115 similar financial charges, while the Blues were forced to sell two hotels to a sister company to ease their financial concerns following a string of transfer splurges. These two issues hanging over the entire PSR debate have only made it more difficult for the Premier League's smaller clubs to stomach the regulations.

For as long as PSR has been in place, clubs have sought ways to bend the regulations. Chelsea raised public consciousness of this following their Clearlake Capital takeover, signing players to startlingly long contracts to ensure they had the smallest impact on their on-the-books spending.

This process is known as amortisation, whereby a player's transfer fee is gradually written off over the course of his contract. For instance, although Mykhailo Mudryk cost the club an eye-watering £89m ($112m), this figure will be evenly spread out over the course of his eight-and-a-half year deal for accounting purposes.

Another way that clubs have been able to fast track their way to PSR compliance is by selling players produced by their academies. These exits count as pure profit in the accounts as clubs have not paid a transfer fee to acquire their services. Their values are not amortised either.

So, if Chelsea were to sell Conor Gallagher for £50m ($63m) this summer, every penny of that fee could be used to help the club become PSR compliant. The Blues have sold a host of Cobham graduates in recent years, but they are far from the only club to flip their youngsters for huge profits.

This set the scene perfectly as we seek to explain the motivations behind the Kellyman, Maatsen, Iroegbunam and Dobbin deals. While we shouldn't accuse the clubs involved in these transfers of directly colluding to circumvent PSR, it's hard to ignore that these dealings are mutually beneficial.

Each of the three clubs involved are reportedly in danger of breaching PSR for the period ending with the 2023-24 season. And the accounting window for those three years ends on July 1, which helps to explain why the clubs were so eager to get each deal over the line before then.

Also, the fact that neither of the exchanges were an official 'swap deal' suggests that PSR considerations were at play. If Everton and Villa had orchestrated a straight swap for Iroegbunam and Dobbin, their accounts would show no profit. By purchasing the youngsters separately, each club has added a sizeable chunk of revenue to their accounts while amortising their respective transfer outlays.

However, GOAL understands that Everton have been tracking Iroegbunam for a number of years, while Villa were not the only club interested in signing Dobbin. When it became clear that each club was willing to do business, though, the fact that they shared interest in each other's players made the double deal easier to complete.

Judging how much unproven players are worth is always challenging, as you are essentially paying for potential as opposed to a proven track record. Even still, it's hard to understand how Kellyman has changed hands for nearly £20m ($25m).

Reaction to each of these inter-club transfers has been fairly strong. According to the BBC, one Premier League side has expressed their intention to report the dealings to the authorities. They likely feel that Villa, Chelsea and Everton are using techniques 'not in the spirit of PSR' to avoid punishment for their recent overspending.

Perceived fairness is not the only issue at play here either. Thanks to the lucrative nature of homegrown players in a PSR sense, it could be argued that some youngster may be used as financial pawns in the future. Top clubs have long been stockpiling English talent, and this process will only accelerate if this practice continues to prove useful from an accounting perspective.

The player involved might not complain - they'll be getting a big move after all - but it's certainly not as romantic as a hometown hero making their debut from a boyhood club is it?

Putting it frankly, though, this has long been the state of play at the upper echelons of English football. There's hope that the financial rules, voted on at the beginning of the month, may at least prevent clubs overspending wages.

And there has at least been some recent examples of clubs being reined in, with Chelsea's habits resulting in amortisation lengths being restricted to five years. Then again, if history teaches us anything, it's that clubs will soon find a way to find a way around these new regulations too.