Taxpayers to foot pounds 3m of Shearer bill
Sunday 11 August 1996
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.
- 1 Sabina Altynbekova, the girl branded 'too good looking' for volleyball, says social media obsession with her is a 'bit much'
- 2 Disney heiress Abigail disowns her share of family profits in West Bank company
- 3 Israel's propaganda machine is finally starting to misfire
- 4 Zayn Malik on Israel-Gaza: One Direction singer bombarded with Twitter death threats after posting #FreePalestine
- 5 'Hello mum, this is going to be hard for you to read ...'
Sally Farmiloe dead: Howards' Way actress, and former mistress of Jeffrey Archer, dies aged 60
Women in Turkey have a laugh in public at the deputy Prime Minister's expense
Sabina Altynbekova, the girl branded 'too good looking' for volleyball, says social media obsession with her is a 'bit much'
Disney heiress Abigail disowns her share of family profits in West Bank company
Australian model Robyn Lawley stages naked protest against huge coal mine seven times the size of Sydney Harbour
The secret report that helps Israel hide facts
Land for gas: Merkel and Putin discussed secret deal could end Ukraine crisis
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
A day in the life of Vladimir Putin: The dictator in his labyrinth
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
- < Previous
- Next >
iJobs Money & Business
£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...
£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...
Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...
£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...