In November 2023, Everton were deducted 10 points by an independent panel after being referred by the Premier League for breaching the English top flight's Profit and Sustainability Rules (PSR).
The decision sent shockwaves through English football as a set of regulations many assumed to be toothless showed unexpected bite.
After being lumbered with the biggest points penalty in Premier League history, Everton launched an appeal against that punishment. They played on in the aftermath in a manner for which players and manager Sean Dyche deserve credit, winning four straight league matches in early December to boost their survival bid. However, a run of just one victory in 13 games in all competitions since has meant they enter March 2023 just a point outside the drop zone.
The decision on Everton's appeal was announced on February 26. The appeal board ruled that the deduction should be reduced from 10 points to six, which would be applied with immediate effect.
Everton said in a statement: "We understand the Appeal Board considered the 10-point deduction originally imposed to be inappropriate when assessed against the available benchmarks of which the club made the Commission aware, including the position under the relevant EFL regulations, and the nine-point deduction that is imposed under the Premier League's own rules in the event of insolvency.
"The club is also particularly pleased with the appeal board's decision to overturn the original commission's finding that the club failed to act in utmost good faith. That decision, along with reducing the points deduction, was an incredibly important point of principle for the club on appeal. The club, therefore, feels vindicated in pursuing its appeal."
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What are Premier League Profit and Sustainability Rules?
The Premier League Profit and Sustainability Rules dictate the amount of money that clubs are permitted to lose over a specific period. They determine how much these teams can spend on things like transfers, in the sense that each club must toe the line when it comes to balancing income and expenditure.
The rules are not the same as UEFA's Club Licensing and Financial Fair Play Regulations, which apply to teams that play in competitions such as the Champions League and Europa League, although there are similarities.
In the simplest terms, PSR allows clubs to lose £105 million ($134m) over the course of three seasons, or £35m per season, on a rolling basis.
This is on the proviso that £90m is covered by secure funding from owners, such as buying up more shares instead of giving their clubs a loan. The three-year losses allowed without such guarantees are £15m.
These calculations do not include spending on a variety of exempt categories, such as youth development and infrastructure projects. Additionally, after the 2019/20 and 2020/21 seasons were heavily affected by the coronavirus pandemic, the Premier League made allowances for clubs to write off losses suffered as a result of the COVID-19 crisis.
If clubs without secure funding exceed the £15m parameter, they can have their budgets limited and transfers restricted by the league in order to bring their finances back into line.
However, the reason for the fixation on the £105m figure is that this is the amount, the big red line, that applies to most clubs. Go beyond this, and you end up being referred to an independent commission to be faced with more severe punishments, as was the case with Everton.
What did Everton do to break Premier League rules?
In their representations to the Premier League, Everton accepted they had exceeded the PSR threshold but cited the cost of interest on loans taken out for the development of their new Bramley-Moore Dock stadium, COVID-19 costs, and the impact of lost sponsorship revenue when oligarch Alisher Usmanov — an ally of their then-owner Farhad Moshiri — was sanctioned following Russia's 2022 invasion of Ukraine.
Ultimately, Everton were unable to make these arguments stick sufficiently and the independent commission found in favour of the Premier League's assertion that the Merseyside club's losses for the three-year period up until 2021/22 tallied at £124.5m — £19.5m beyond the PSR threshold. An independent commission decided the Toffees should be deducted 10 Premier League points.
Everton formally appealed against that punishment, and the result of that appeal is expected to be announced soon. They have since been charged on similar grounds in relation to their 2022/23 accounts, along with Nottingham Forest.
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Everton appeal against points deduction successful
It was announced on February 26 that Everton's appeal had seen their points deduction reduced from 10 points to six. The club said it was pleased with the outcome, not least because the appeals board ruled that the original finding of the independent commission that Everton did not act in "utmost good faith" was overturned.
The decision should inspire confidence at the club when it comes to contesting their most recent charges.
Everton and Forest must face an independent commission to decide what, if any, punishment they will face, or to lodge an appeal against any sanctions. The cut-off for that process is May 24, which is five days after the final round of Premier League fixtures.
"Notwithstanding the appeal board's decision, and the positive outcome, the club remains fully committed to cooperating with the Premier League in respect of the ongoing proceedings brought for the accounting period ending in June 2023," Everton said.
"The club is still considering the wider implications of the decision and will make no further comment at this time other than to place on record its thanks to our Fan Advisory Board and other fan groups throughout this process, and to all Evertonians for their ongoing support and patience."
Will Everton be relegated from the Premier League?
Everton's 1-1 draw against Brighton & Hove Albion on February 24 put them a point and a place outside the relegation zone in 17th, having played a game more than third-bottom Luton Town.
Following their changed points deduction, they now sit in 15th place after 26 matches, five points above the relegation zone.
Now, we must factor in what, if any, punishment they will receive for the most recent alleged PSR breach. At this point it should be acknowledged that Forest are in 17th place and only four points clear of the drop zone.
As such, if the midlands club have any points taken off, it could prove terminal to their survival hopes.
