As the EFL transitions to a new “Squad Cost Rules” iteration of Financial Fair Play (FFP), our resident football accounting expert Simon Dorset breaks down what counts, what doesn’t, how it works, and what it all means.

Recently the English Football League (EFL) published their regulations for the 2026/27 season which contains details of the Squad Cost Rules (SCR), their third incarnation of Financial Fair Play (FFP). Championship clubs ran an SCR system in shadow alongside the incumbent Profitability and Sustainability rules (PSR) last season to road test its operability so the basic concept was known but some significant changes have been made to this.

One of PSR’s biggest weaknesses was that it was based on the club’s accounts. This not only meant it was generally looking backwards at what had already happened, but also that some clubs were constantly seeking short term gains to increase their spending power which, while most were perfectly legitimate business and accountancy practices, were generally not to the long-term benefit of the club.

SCR looks forward to the coming season and, in an attempt to bypass any accounting chicanery, sits outside of the club’s profit and loss account. It is based on the movement of money within the reporting period. The EFL kindly provide a graphic to give an overview of how this works.

Let’s look at each element in turn.

In the red corner

Player Related Expenditure

All expenditure regarding a players’ wages, bonuses (excluding promotion bonuses), signing on fees, image rights, employer contributions, other benefits, agents’ fees, termination fees and registration acquisition instalments. For those who could never be bothered to get to grips with amortisation, you have been vindicated as it is out of the SCR calculations – although it does remain a significant component of the club’s statutory accounts. It is the actual payments made that matter, making the negotiations around staged payments even more important.

Manager Related Expenditure

As above but regarding the manager or head coach. Strangely, only the manager or head coach is specified, so presumably all of the other coaches are not included.

Agent’s Fees

Any other agents’ fees not already captured in the above two elements.

Non-Established Under 21 Player Expenditure

An under 21 player is regarded as established when he either has started ten first team matches or his annual salary exceeds £300,000 and he is not a club developed player.

In the blue corner

Allowable Equity Income Injection

To help with the squad costs, clubs are allowed to receive equity injections from any source. The baseline annual allowance is based on the difference between the Year 1 parachute payment received by relegated clubs from the Premier league and the Solidarity Payment received by clubs not entitled to a Parachute Payment. For this season that is £11.43m. In the first three seasons of SCR, clubs are allowed up to £34.3m (£11.43*3), with no more than £16m in any one season. Cash injections for non-squad costs are permitted and outside the scope of SCR.

85% of Relevant Turnover

Relevant Turnover is separated into three categories: Gross Revenue Basis, Gross Profit Basis and Net Profit Basis

As a rule of thumb, income generated by football activities is treated on a Gross Revenue Basis and so does not have any associated costs deducted from it. This would include gate receipts, broadcasting rights, sponsorship and prize money from cup runs (No? Nor me!).

Income not directly generated by football activities but which is dependent on the club’s name or brand is treated on a Gross Profit Basis (revenue less direct costs). Typical examples of this would include merchandise, including replica shirts, other retail items, and outsourced match day hospitality, beer and burgers.

Other revenue streams such as non-matchday use of the stadium, hotels, restaurants and conference centres are treated on a Net Profit Basis meaning that all the attributable costs have been deducted.

The list of items completely excluded from Relevant Turnover include the profit on the disposal of fixed or current assets (excluding player registrations), loan write offs and government grants and subsidies.

85% of Allowable P&M Trading Amount

This is the money received in the reporting period including for sales of player registrations, manager compensation costs, loan fees received (net of any wage costs) and contingent payments (add-ons) received.

Clubs are required to make three submissions of their information per season. A pre-season submission by April 30, or within seven days of their divisional status being confirmed, a mid-season submission by November 1 and a final submission by July 16. There are a number of provisos for clubs being promoted, relegated or having a later year end than July 16. Clubs are also required to submit their fully audited accounts for the previous season by December 31.

This is a very simplified as the rules run for almost 50 pages, but hopefully it gives a decent (and hopefully accurate) overview of SCR. If anyone thinks I’ve misinterpreted the rules, please shout and we can work it through.

Is this good or bad for us? It is very hard to tell. Our published accounts don’t show sufficient detail to enable our SCR position to be calculated, but with the rolling three-year model gone I think the necessity has gone too. I do, however, regard myself as a winner here as I think this means I can leave the annual accounts analysis to Niall (not so fast – ed).

As a final thought, if, as we suspect, QPR’s major signings over the last couple of summers are on long-term contracts to reduce the annual amortisation, there may be a slight gain as the scheduled payments would normally be completed in a shorter time period.

Also by this author >>> Running to stand still – where does QPR’s money go? >>> Daylight fading, or speculate to accumulate – 24/25 Accounts >>> And breathe – 23/24 accounts >>> Always crashing in the same car -22/23 accounts >>> Edge of the precipice – 21/22 accounts >>> Paying Dividends - 20/21 accounts >>> Grounds for Concern >>> Gordon Jago: Leading From The Front >>> The Trust >>> Accounting for success - 19/20 accounts >>> Gambling with FFP - 18/19 accounts >>> The greater evil >>> Terry Venables: My first hero >>> QPR’s fairytale of New York

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Pictures - Reuters Connect

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