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New Football League Rules on Debt and Transfers

From the BBC

Football League clubs will be subject to a transfer embargo if they fall behind on their tax payments.

Clubs voted to accept the new regulations at the Football League's Annual General Meeting.

Under the new system clubs will not be able to deal in the transfer market until their debt is cleared.

"This new regime will provide us with an early warning system where clubs are facing financial problems," said League chairman Lord Brian Mawhinney.

"It is only right we do not permit clubs that are unable to meet the costs associated with their existing playing staff to make further new player commitments."

The regulations have been introduced in an attempt to make clubs more prudent and to ensure they comply with all employee related payments to Her Majesty's Revenue & Customs.

The new system should also impact on a club's ability to come out of administration without incurring additional points penalties.

A club must agree a Company Voluntary Agreement with 75% of its creditors in order to leave administration.

And when a club is in administration it must pay in full its debts to its football creditors - a policy that is opposed by HMRC, which is no longer a preferential creditor and often has to settle for a greatly reduced offer.

As HMRC is often more than 25% of a club's debt it effectively has the power to block a CVA and has recently been exercising its right to do so.

Mawhinney said the new regulations "should also help prevent HMRC debt reaching levels that otherwise could hinder the potential rescue of the club through a CVA".

He added: "More importantly, football generally needs to develop a culture of paying its debts rather than putting them off for another day. This will help our clubs to become more financially sustainable in the longer term."

Clubs have also agreed to give the Football League written permission to monitor, as appropriate, their tax affairs directly with HMRC.

Meanwhile, the number of substitutes on the bench in the Football League next season has increased from five to seven after a proposal from Derby was accepted.
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