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Have we sold our ground


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Guest LondonOwl313
4 hours ago, HirstWhoScoredIt said:

Derby's ground was also valued for far less in their accounts.

 

The WHOLE POINT of the transaction is that you sell it for far more than it is valued at in the accounts.  That is where the 'profit' comes from - the difference between the price paid and the value in the balance sheet.

 

An independent valuation will have taken place that will go something like - Wednesday sign 10 year lease to rent the land at £4m (made up figure) per annum.  Therefore value of ground is 20 x the annual rental income.  Therefore valuation in at £80m.  Chansiri buys the ground for £80m which creates £55m of profit to go through the P & L.

are you sure that’s how it works? I think for tax purposes there’d be a capital gains tax on the sale price minus purchase price, but not sure what they would use for purchase price given it’s been owned for so long, might be some indexing for inflation. I don’t think the balance sheet valuation of the asset has anything to do with it though. Then there’s a stamp duty on purchasing it for the new company... sounds expensive to do.

 

as for the P&L, in accounting terms I think it goes down as a extraordinary one off item, it’s money received for an asset that has nothing to do with the primary business of the company (I.e. running a football club). I’ve got no idea on the P&S rules though, seems very odd to me that you can do this to get around it.. but unless they publish it transparently then we’re all in the dark on what is and isn’t allowed

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12 minutes ago, asteener1867 said:

I don't like the amount of money in football anyhow Hirsty mate, no matter where it ends up....

 

It's ridiculous, and the more money it attracts the more it attracts unscrupulous characters.

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1 minute ago, matthefish2002 said:

 

Poor article.

Not up to the supporters at all.

Desicion is with Chansiri.

 

Think he's implying it's only a good decision if the majority of the supporters think it is. Or some gubbins like that. 

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11 minutes ago, Hitcat said:

 

Think he's implying it's only a good decision if the majority of the supporters think it is. Or some gubbins like that. 

 

Will only be able to tell if its a good decision in about 5 years time.

 

Not sure how you know if most supporters are in favour or not.

Up to Chairman not supporters to look into it thoroughly before making a decision.

 

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18 minutes ago, Hitcat said:

 

Think he's implying it's only a good decision if the majority of the supporters think it is. Or some gubbins like that. 

 

suppose then it'll be our fault  bit like the Rhodes gamble

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On 17/05/2019 at 10:03, mogbad said:

We've only recently heard about Derby's ground sale but according to the Times report it's reflected in the 2017/18 accounts.

 

I'm no expert on financial matters as my bank manager will testify but surely this sort of thing can't be done & then added to the accounts retrospectively after the financial period has closed.

 

Yes it can 

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43 minutes ago, LondonOwl313 said:

are you sure that’s how it works? I think for tax purposes there’d be a capital gains tax on the sale price minus purchase price, but not sure what they would use for purchase price given it’s been owned for so long, might be some indexing for inflation. I don’t think the balance sheet valuation of the asset has anything to do with it though. Then there’s a stamp duty on purchasing it for the new company... sounds expensive to do.

 

as for the P&L, in accounting terms I think it goes down as a extraordinary one off item, it’s money received for an asset that has nothing to do with the primary business of the company (I.e. running a football club). I’ve got no idea on the P&S rules though, seems very odd to me that you can do this to get around it.. but unless they publish it transparently then we’re all in the dark on what is and isn’t allowed

 

Agree with your points about potential tax issues but I’m fairly sure well  paid advisers will have been involved.

 

There doesn’t appear to be anything specific in the P&S rules to prevent this hence clubs looking at this as an option. Of course the rules need reviewing at the same time as parachute payments need to be.

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9 hours ago, room0035 said:

 

Is the club losing £20m a season or is the guy in charge losing £20m a season because the club is not being managed correctly.

 

To manage a club correctly you have to maximise income and reduce costs:

 

Maximise income from sponsorship, corporate entertaining, the fans, merchandise that people want at a price they are prepared to pay, sell players at the right time or the right price

Reduce cost - get players off the wage bill not playing, loan out squad players to get first team football, make the ground an income source outside of match days.

 

Do this with any level of competences and the losses would be less, the only think I can see he is doing from the above is maximise income from the fans.

 

We need to end the excuses and get people into the club that can take us forward and address our many short comings, a director of football could be the most important signing DC has ever made and a Corporate manager who knows how to manage a football team.

 

I agree with virtually all of this but it has been said many times over the past couple of years. Hopefully we will see a start this close season by not signing any old,injury prone, overpaid players.

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Guest mkowl
2 hours ago, LondonOwl313 said:

are you sure that’s how it works? I think for tax purposes there’d be a capital gains tax on the sale price minus purchase price, but not sure what they would use for purchase price given it’s been owned for so long, might be some indexing for inflation. I don’t think the balance sheet valuation of the asset has anything to do with it though. Then there’s a stamp duty on purchasing it for the new company... sounds expensive to do.

 

as for the P&L, in accounting terms I think it goes down as a extraordinary one off item, it’s money received for an asset that has nothing to do with the primary business of the company (I.e. running a football club). I’ve got no idea on the P&S rules though, seems very odd to me that you can do this to get around it.. but unless they publish it transparently then we’re all in the dark on what is and isn’t allowed

The accounting profit would be

 

Sales price - Valuation in the accounts

 

You would also do another accounting shift between reserves as well.

 

The relevant bit for FFP is the top one. You are right it is an exceptional item but there is nothing anyone can see in the FFP rules stopping this counting

 

Tax wise different matter, it is sales price minus the original cost. Now what that is  with transfer of assets between companies historically could be interesting. So it may be what is known as the March 82 value that is used. Indexation applies upto December 2017 and would add on to the historic cost. The factor is about 2.5. So if the original cost was 10m the tax deduction would be 35m. 

 

You could also deduct trading losses of the year as well.

 

Stamp duty - not my expertise but wonder if there could be an exemption as you say it  could be a lot otherwise

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3 hours ago, LondonOwl313 said:

are you sure that’s how it works? I think for tax purposes there’d be a capital gains tax on the sale price minus purchase price, but not sure what they would use for purchase price given it’s been owned for so long, might be some indexing for inflation. I don’t think the balance sheet valuation of the asset has anything to do with it though. Then there’s a stamp duty on purchasing it for the new company... sounds expensive to do.

 

as for the P&L, in accounting terms I think it goes down as a extraordinary one off item, it’s money received for an asset that has nothing to do with the primary business of the company (I.e. running a football club). I’ve got no idea on the P&S rules though, seems very odd to me that you can do this to get around it.. but unless they publish it transparently then we’re all in the dark on what is and isn’t allowed

I am pretty sure that the profit is as I described it, sales price less book value in accounts.

 

Unless there is an exemption somehow, I believe stamp duty would be 5%.

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Guest mkowl

A stamp duty exemption would apply if the property was transferred between members of a group. 

 

 

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Guest mkowl
2 minutes ago, HirstWhoScoredIt said:

I am pretty sure that the profit is as I described it, sales price less book value in accounts.

 

Unless there is an exemption somehow, I believe stamp duty would be 5%.

Yep 

 

0% upto 125k

2% 125k to 250k

5% above that

 

Rate for non residential property

 

Exemption possible if within a group

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31 minutes ago, torryowl said:

I don't think the bin laden family made there money from terrorism …...

No, but it's where they made their name (in)famous worldwide.

Embarrassing for any Western club to be linked with that family name, so glad it's them that's allegedly taken money from them and not us.

 

Edited by OWL1969
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Guest LondonOwl313
3 hours ago, mkowl said:

The accounting profit would be

 

Sales price - Valuation in the accounts

 

You would also do another accounting shift between reserves as well.

 

The relevant bit for FFP is the top one. You are right it is an exceptional item but there is nothing anyone can see in the FFP rules stopping this counting

 

Tax wise different matter, it is sales price minus the original cost. Now what that is  with transfer of assets between companies historically could be interesting. So it may be what is known as the March 82 value that is used. Indexation applies upto December 2017 and would add on to the historic cost. The factor is about 2.5. So if the original cost was 10m the tax deduction would be 35m. 

 

You could also deduct trading losses of the year as well.

 

Stamp duty - not my expertise but wonder if there could be an exemption as you say it  could be a lot otherwise

I guess in theory it would be possible to do this every year by injecting cash into the football club, buying back the stadium from the holding company, then selling it to another new holding company and repeating the process. Not sure how much tax would be incurred in doing that.

 

The other point is that presumably we now have to pay a rental charge yearly which will come out of the accounts. Not sure whether this will come out of the profit (loss) figure before the £39m over 3 years test is applied for FFP, if it doesn't then it will affect the amount we can lose every year going forward.

 

You're clearly an accountant, I've studied it before but don't work in it, so not sure on the finer details. But I always gathered that double entry is key, so if stadium sales count for FFP you'd think that payments out in relation to renting stadiums should also count.

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Guest mkowl
4 hours ago, LondonOwl313 said:

I guess in theory it would be possible to do this every year by injecting cash into the football club, buying back the stadium from the holding company, then selling it to another new holding company and repeating the process. Not sure how much tax would be incurred in doing that.

 

The other point is that presumably we now have to pay a rental charge yearly which will come out of the accounts. Not sure whether this will come out of the profit (loss) figure before the £39m over 3 years test is applied for FFP, if it doesn't then it will affect the amount we can lose every year going forward.

 

You're clearly an accountant, I've studied it before but don't work in it, so not sure on the finer details. But I always gathered that double entry is key, so if stadium sales count for FFP you'd think that payments out in relation to renting stadiums should also count.

 

I am not sure doing it every year would work. It only works at this time for FFP because you can book the accounting profit. This is because you are arguing the current value is greater than that shown in the historic accounts.

 

Technical point would be why the accounts have never shown that higher value as accounting standards would generally require this but erm anyway moving on

 

However in subsequent years the value should not change that much. Say you bought it back on 1st August then sold it on the 31st July you shouldn't really be making a profit 

 

You can't be arguing that the sale back to the club in August is 40m but the sale to the 3rd party it's back to 80m. Don't forget the caveat in all this is commercial values are substituted by the EFL not what the contract says

 

In answer to your final point then absolutely the rent payable is a cost for FFP.

 

And of course there could be a circular function here. I have no idea how you calculate an in use value for a football stadium, but rental yield could be an option. So you can't be saying the stadium is worth 80m but only pay a £1 in rent. Well you could but the EFL will argue the valuation is a function of the rent. The rent should be a commercial rate on the valuation. A commercial landlord would look at a min 5% yield which on 80m valuation is 3.6m rent per season

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Alan Biggs is getting at something I mentioned earlier in the thread. If people accept this as financial semantics to ease a problem it will work well in the short term and likely heal some of the fan and chairman tensions over the last 18 months. He will have put his money up to solve an issue that was a threat and he will want to see that recognised.

 

If he does it and gets a backlash for potential future implications then it solves FFP but could make him wonder why he bothered and then we would be in the sale scenario feared where the stadium and club are separated.

 

I think all concerns are valid but just need to be raised in the right manner to seek assurances for the future rather than jumping to conclusions/expecting the worst of the owner in the future. As a fan base it’s one to be diplomatic with. 

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