There are two pieces of good financial news for Newcastle United today.
Ashley and Llambias – have the club in excellent financial health
The first is that Newcastle are the latest club to settle a dispute over image rights with the UK tax authorities.
Payments classed as image rights rather than as wages are taxed at a corporate tax of 26% rather than the income tax rate of 50% on wages.
So wherever possible and legal, payments are classed as image rights – but both those corporate tax rates are high indeed.
Newcastle have come to a settlement with the UK Revenue and Customs, and have also come to some agreement on future payments as well – which is good.
And the second piece of good news is the Tyneside club will be releasing its financial results later in the week for the financial year through June of last year, and the news in the Daily Telegraph today is that they will show a profit for the first time since Mike Ashley took over the club in the summer of 2007.
As a long term business, we are also hoping that profits will be ploughed back into the club, so Mike Ashley runs Newcastle as a zero profit business, so to speak.
The UEFA Financial Fair Play regulations are coming into effect over the next three years or so, and the basic aim of the rules is to get football clubs to balance their books.
That’s so that clubs like Portsmouth, Glasgow Rangers, Southampton, Plymouth and Port Vale – to name only a few – do not go bankrupt.
That means spending only what comes into the club in terms of revenues, so the revenue numbers in their latest financial results will be interesting for Newcastle, and we can see what the increase is over the previous financial year.
For UEFA to have to force this shows that clubs, and it’s usually the big clubs, spend money they just haven’t got, just as Newcastle did under Freddy Shepherd.
Glasgow Rangers are the latest club to go belly up, and they are now negotiating with the players on how to cut their wages, so they can save £1M a month through the end of the season.
Events like these will make it much more difficult for clubs who get into trouble, to attract good players in the future, but that’s not the case with Newcastle United these days.
The club is run in a thrifty manner, which means the club can pay out big wages to their top players who deserve them when they have to – like to Fabricio Coloccini and Tim Krul as two very good recent examples.
We know a number of fans don’t like the clubs to be run as out-and-out businesses, but the reality these days is that the financial side of a football club is almost as important as the playing side, and football is getting to be a huge global business.
Newcastle at the moment seem to be in good shape on both fronts.