QPR fiddling the books?

[Mileoakman]

So QPR have reduced their losses from £69m to £9.8m and now look likely to only receive a small fine!

They have done this by writing off £60m of loans which looks like a complete fiddle to me. As they still have about £120m of loans outstanding they should be good for a few more years if they pull the same trick again!

FFP for some it seems,

 

[SteveTheSeagull]

We all know FFP is anything but fair.

 

[Kinky Gerbil]

Haha of course.

 

[HawkTheSeagull]

Rather convenient the loans have been written off.......If we done the same, our losses would have been much lower in that case - it just makes a mockery of the system.

Parachute payments count towards that amount as well remember.

 

[Badger]

I really REALLY hope QPR get found out and fail FFP in spectacular fashion.

Sadly this won't happen.

 

[Hillian1]

Am I missing something here?

Aren't we balls deep in debt to Tony and he's written off the debt.

 

[seagullsovergrimsby]

Is this any different to Uncle Tony converting part of his massive non-interest loan into shares ?

 

[Dick Swiveller]

Am I missing something here?

Aren't we balls deep in debt to Tony and he's written off the debt.

I believe that money spent on Infrastructure does not count towards FFP losses. QPRs money was trousered by expensive players which does count towards FFP losses.

 

[KZNSeagull]

I cannot see how that works at all, unless what they are saying is that they were paying 60m a year in interest. Writing off loans cannot make a difference to income or expenditure otherwise, surely? TB has loaned the club 140m - writing that off tomorrow would not make any difference to FFP at all, as we are not paying anything back to him.

 

[El Presidente]

Writing off £60m of loans is unlikely to affect the losses.

What I can't work out is how they are coping with £30-40m less income from relegation, cutting only £22 million from the player budget, yet reduced the losses by £50 million.

 

[KZNSeagull]

Am I missing something here?

Aren't we balls deep in debt to Tony and he's written off the debt.

He has not written it off, some of it has been converted to shares. It makes no difference under FFP, unless the club are paying interest on the loan or paying the loan back, which is why I do not understand this article - it implies (to me anyway) that QPR saved 60m last year in loan repayments/interest.

 

[KZNSeagull]

Writing off £60m of loans is unlikely to affect the losses.

What I can't work out is how they are coping with £30-40m less income from relegation, cutting only £22 million from the player budget, yet reduced the losses by £50 million.

Unless they were paying 60m a year in loan repayments!

 

[Buzzer]

I might have misunderstood this but by recognising the money as income is, I think, a good thing.

Ordinarily, If a director lends a club money then the loan sits on the balance sheet as outstanding and the money goes to the bank account. The director can place all sorts of conditions on that loan - for instance have it secured against club assets or get the club to make it a preferential creditor so that if the club gets into financial difficulties, the loan has to be prepaid before others are considered. Otherwise the debt just sits on the balance sheet until the director wants it back.

Some clubs, such as the Albion have a large loan written as convertible which means that the director can write off the loan and in return get x number of shares. This is quite common where the director doesn't ever expect to see his money again so just treats it as an investment in the club.*

In this instance, QPR have converted the loan into income (presumably as sponsorship or somesuch), so 60 million quid is removed from the balance sheet. The director can't ever get his hands on that money again and can't convert it into shares. QPR may also have additional VAT liabilities to take into account by recognising the £60m as income (I'm not a VAT expert) and the director might of course treat the £60m as expenses that he can offset against his other business(es) but treating it as income is probably the least dodgy way of QPR accepting the money because they account for all the money as standard receipts, it reduces the losses and the director can't use the loan as leverage against the club in the same way as Ken Bates et al did elsewhere.

Happy to be corrected on this, but that's my reading of it: essentially forcing QPR and its directors to keep everything above board.

*EDIT - (If TB wrote off his £200m investment and the club had to treat it as income as QPR have done then BHA would have the mother of all tax bills.)

 

[seagullsovergrimsby]

Writing off £60m of loans is unlikely to affect the losses.

What I can't work out is how they are coping with £30-40m less income from relegation, cutting only £22 million from the player budget, yet reduced the losses by £50 million.

South East Asian accounting practices

 

[El Presidente]

I might have misunderstood this but by recognising the money as income is, I think, a good thing.

Ordinarily, If a director lends a club money then the loan sits on the balance sheet as outstanding and the money goes to the bank account. The director can place all sorts of conditions on that loan - for instance have it secured against club assets or get the club to make it a preferential creditor so that if the club gets into financial difficulties, the loan has to be prepaid before others are considered. Otherwise the debt just sits on the balance sheet until the director wants it back.

Some clubs, such as the Albion have a large loan written as convertible which means that the director can write off the loan and in return get x number of shares. This is quite common where the director doesn't ever expect to see his money again so just treats it as an investment in the club.

In this instance, QPR have converted the loan into income (presumably as sponsorship or somesuch), so 60 million quid is removed from the balance sheet. The director can't ever get his hands on that money again and can't convert it into shares. QPR may also have additional VAT liabilities to take into account by recognising the £60m as income (I'm not a VAT expert) and the director might of course treat the £60m as expenses that he can offset against his other business(es) but treating it as income is probably the least dodgy way of QPR accepting the money because they account for all the money as standard receipts, it reduces the losses and the director can't use the loan as leverage against the club in the same way as Ken Bates et al did elsewhere.

Happy to be corrected on this, but that's my reading of it: essentially forcing QPR and its directors to keep everything above board.

Cannot see how a loan write off could ever satisfy the definition of income. If it does then FFP is even more of a farce than before.

 

[beorhthelm]

...In this instance, QPR have converted the loan into income (presumably as sponsorship or somesuch), so 60 million quid is removed from the balance sheet. The director can't ever get his hands on that money again and can't convert it into shares. ...

im not sure this explains it, isnt the whole point of FFP to stop the owners pumping money into the club? or is there an assumption that owners normally loan the money in, and QPR have spotted a massive hole in the rules...?

 

[rool]

Cannot see how a loan write off could ever satisfy the definition of income. If it does then FFP is even more of a farce than before.

It wouldn't be operating income but would have to appear in the P&L as a credit somewhere therefore reducing bottom line losses

 

[Mileoakman]

Cannot see how a loan write off could ever satisfy the definition of income. If it does then FFP is even more of a farce than before.

I agree. I thought you couldn't just gift money to a club, (which essentially writing off loans is), so I can't see how this is allowed for FFP.

 

[Buzzer]

Cannot see how a loan write off could ever satisfy the definition of income. If it does then FFP is even more of a farce than before.

The club could backdate an invoice for sponsorship. I really can't see HMRC ever complaining about a business using creative accountancy to convert a director's loan into income as surely it moves a very large sum of money from a non-taxable event to a taxable event. Saying that, I'm not sure what the position is if it's treated as a gift from the director. HMRC guidance is vague (of course!)

http://www.hmrc.gov.uk/manuals/bimmanual/bim41810.htm

This could well be a key point that makes a gift taxable:

if the character in the recipient's hands is that of a payment made in order that the money may be used in the recipient's business, to supplement trading or other business receipts and to enable the recipient to carry on business, or otherwise to preserve and maintain trading stability and solvency, then it will be a taxable trading receipt

 

[Buzzer]

im not sure this explains it, isnt the whole point of FFP to stop the owners pumping money into the club? or is there an assumption that owners normally loan the money in, and QPR have spotted a massive hole in the rules...?

But Forest have pumped in £500m over 10 years and called it stadium sponsorship.

I agree. I thought you couldn't just gift money to a club, (which essentially writing off loans is), so I can't see how this is allowed for FFP.

I'm not so sure you can't gift a club money.