Why Premier League's 'swap weekend' could be another PSR loophole

Chelsea's Dutch defender Ian Maatsen impressed on loan for Borussia Dortmund last season, but is being sold to Premier League rivals Aston Villa

Everton, Aston Villa, Chelsea and Newcastle fans might have woken up on Saturday and mistakenly thought it was transfer deadline day.

Lesser-known 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.

Before both potential deals abruptly ended on Monday, Everton were also said to be interested in Newcastle United’s highly rated Gambian teenager Yankuba Minteh - with Newcastle reported to be signing striker Dominic Calvert-Lewin from Everton.

But it wasn't 1 September, it was a normal Saturday in June. And one thing all four of these busy clubs have in common? Concerns over their Premier League Profit and Sustainability Rules (PSR) position as they approach the 30 June accounting deadline.

This flurry of transfer activity immediately drew scepticism, but has also annoyed some rival clubs.

And BBC Sport knows of at least one club that is so concerned it intends to raise the matter with the Premier League.

No-one is breaking the rules, but questions have been raised over valuations, the use of young players, and whether this has highlighted a loophole in the league’s PSR system which can be used to limit losses.

What was the reaction, and why?

Introduced with the intention of boosting financial stability and encouraging clubs to live within their means, PSR losses are limited to £105m over a three-year period. Critics say these regulations also protect the richest clubs by stifling ambition and investment by those who want to challenge the status quo.

The transfers sparked intense speculation on social media that certain clubs were working in tandem to strike deals that would improve their balance sheets as a means of avoiding a breach of PSR limits.

It is easy to see why some might suggest this.

First, there is the timing. With clubs having to submit their accounts by 30 June, the end of the Premier League's financial year - effectively its accounting deadline - is just a few days away.

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.

Secondly, all the clubs involved reportedly face challenges meeting PSR limits.

Everton breached the rules for both 2021-22 and 2022-23, suffering two separate points deductions. And with losses of £90m in their last financial results, they confirmed players will be sold this summer.

Villa have insisted they will avoid a PSR breach. But after recording a £119m loss last season, were thought to need to sell players - such as Douglas Luiz - in order to do so, despite qualifying for the Champions League.

They also recently attempted (and failed) to have the level of permitted losses raised, and have warned they could make a formal complaint against the Premier League over rules they regard as restrictive.

Chelsea have also said they are confident they will comply with the rules. But having recorded a pre-tax loss of £90m in their most recent accounts, some experts have suggested they may also have to sell players if they are to avoid getting in trouble.

Newcastle United meanwhile - despite the vast wealth of their Saudi owners - chose not to sign any players in the January transfer window over worries they may be at risk of breaching PSR, with the club admitting they may have to sell a top player to comply.

The third area of debate is the valuations of some of the players. Take Kellyman for instance. Chelsea rate the England Under-20 international very highly.

But is it understandable they were prepared to spend £19m on a player that Villa picked up for £600,000 from Derby County’s academy two years ago, and who has made just six first-team appearances, totalling 150 minutes of action? Such a valuation is great news for Villa of course, who can register almost £19m of profit in this year's accounts.

The clubs concerned could point out that huge fees for young players is nothing new, and in time can often be vindicated.

Eyebrows were raised when Chelsea splashed out £42m on Cole Palmer last year despite limited opportunities at Manchester City. It now looks like very smart business. As does the £45m that Newcastle paid for Anthony Gordon - the club’s second most expensive signing - despite just seven goals from 78 games for Everton.

'Mutually beneficial deals'

"Working out a market value for a former academy player is very difficult, as ultimately it is what both the buying and selling club decide, based on their future expectations of that player's contribution on the pitch," football finance expert Kieran Maguire told BBC Sport.

"Player 'swaps' can be mutually beneficial for two or more clubs who need to make a quick profit."

Maguire lays out a hypothetical scenario in which 'Club A’ has a former academy player who it would normally look to sell for £8m, while 'Club B' has a former academy player it would usually value at £10m.

"However, if a swap deal is made there is nothing to stop the 'official' price to be £28m and £30m," explains Maguire.

"This way there is still a cash settlement of £2m, but the profits in the accounts are £28m and £30m - fantastic for PSR. The additional cost of signing both players is then spread using amortisation over the contract life of five years, so is effectively kicked down the road.

"Given that it is so difficult to determine the market price for a player, the swap market can be seen as exploiting a weakness in the rules, but is not necessarily breaching anything."

There is no suggestion that this is what any of the clubs have done in the deals outlined above. But the PSR system does seem to encourage the ramping up of valuations if it suits both parties in the short-term at least.

This would not be the first loophole that clubs could exploit to meet PSR.

Earlier this year it emerged Chelsea had controversially eased their losses by selling two Stamford Bridge hotels to a sister company for more than £70m. Some other clubs were said to be unhappy.

But earlier this month, the Premier League failed in an attempt to stop the use of profits from the sale of fixed assets like training grounds and stadiums being used in PSR calculations, with nine clubs voting against any rule change.

Perhaps spooked by the points deductions that Everton and Nottingham Forest were hit by last season, several were clearly happier for a potential workaround to the rules to remain in place.

On the other hand, the Premier League did close another loophole last year when it capped amortisation at five years, in line with Uefa, after Chelsea offered eight-year contracts, enabling them to spread the cost of transfers over that period. Chelsea were among the clubs to back the change.

What do other clubs think?

BBC Sport approached Chelsea, Villa, Everton and Newcastle United to ask if they would like to respond officially to suggestions that valuations in their recent transfer deals were 'convenient' for both parties when it came to navigating PSR.

All declined to comment, but privately, sources at two of the clubs robustly defended the valuations of the players they had done business over, referencing similar amounts paid for young players in recent seasons. They made the point that a player value was ultimately dictated by what a buying club was willing to pay.

But what of other Premier League clubs? We spoke to several and they seemed split. One told BBC Sport that the deals were "wrong and should not be allowed". Another said the transfers "made a mockery of the rules" and that it would be asking the Premier League for its observations.

Others were more relaxed, accepting that the transfers were ultimately within the rules. However, one did admit the 'optics' created by the transfers were unhelpful, and that the controversy only served to emphasise that PSR was too blunt an instrument, and was failing to help clubs to invest and create the best league in the world.

The Premier League also declined to comment. But if clubs try to circumvent its rules, they could be in breach, and it can review any transfer to check that it is being done on an arm's length basis. If it is not, the league can assess it for 'Fair Market Value'.

What about the players?

Questions have also been raised over whether all this highlights a risk that clubs may use their academies to produce players that can then simply be traded to help meet PSR, rather than develop them for their first team.

According to one source that acts on behalf of footballers, "this is the latest example of players being used partly as commercial assets rather than employees".

Some clubs that we spoke to, however, made the point that academies have often been used to develop talent with a view to selling it on, rather than prioritising future talent for the first team.

The PFA declined to comment, but it is understood to share a concern that the current regulations could encourage clubs to find creative ways to stay within the rules, and that this will often impact players.

PSR was already highly contentious of course, given the growing list of clubs falling foul of it. The sense is that these deals - amid claims of 'gaming' the system - have ensured they have become even more divisive.

And with new financial rules being trialled from next season, they will add to the pressure on the Premier League to ensure that next time there are no unintended consequences.