Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Taxpayers to foot pounds 3m of Shearer bill

Richard Halstead
Saturday 10 August 1996 23:02 BST
Comments

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

Newcastle United will use taxpayers' money to help pay for its record-breaking pounds 15m signing, Alan Shearer, after a change in its accounting policies.

The club will write off the entire cost of buying the England striker in its 1995/96 accounting year, generating an estimated pounds 3m tax credit that it can use in subsequent years to offset corporation tax on its profits.

The credit could prove especially valuable to Newcastle if it proceeds with its intended pounds 160m stock market flotation later this year.

For now it means that Mr Shearer, who last month became the world's most expensive footballer after his move from Blackburn Rovers, will not appear on Newcastle's balance sheet when the club publishes its 1995/96 accounts. Instead, the club will take the pounds 15m as a charge against its profit and loss account.

The charge is likely to push the club into loss for the year, despite having a very successful season in which it came second in the Premier League, earned more than pounds 3m from satellite television contracts, and sold more branded merchandise than any other club except Manchester United.

The total loss for the year is expected to be in the region of pounds 10m, which the club can carry forward to subsequent accounting years and set against profits. At this level, the tax saving on the purchase of Mr Shearer could top pounds 3m, making his effective cost to the club only pounds 12m.

The practice of using the profit and loss account - and in Newcastle's case, tax credits - to mitigate the cost of signings may boost a flurry of high-cost transfers, as Premier League football clubs seek to bolster their player rosters and save tax at the same time.

However, it is expected to come under fire in a report on the football industry's finances, due to be published next week by accounting firm Deloitte & Touche.

The accountant will argue that representing players on a club's balance sheet and depreciating them over the course of their contracts, in the same way as companies would depreciate the value of buildings and office equipment, gives a better representation of a football club's financial affairs.

Some clubs changed to this standard three years ago, capitalising players at their acquisition cost and then reducing the value over time to a "residual" value based on the player's transfer value at the end of his playing contract.

But clubs have reversed their policy in light of the ruling in the European Court of Justice in favour of Belgian footballer Jean-Marc Bosman, which allows players to move without charge between clubs at the end of their playing contracts.

Moves are also afoot at the regulator the Accounting Standards Board to formalise the treatment of intangible assets such as footballers. In a recent discussion paper, it outlined proposals to require companies to put such assets on their balance sheets and not write them off in their profit and loss accounts.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in