Some points that might help others with FFP (scmp) and clarifies your point on transfer fees.
In League 1 clubs can spend a maximum of 60% of their turnover on wages - in League 2, the limit is 55%. There are no restrictions (in themselves) on the amount a club can lose or spend on transfer fees.
Under the SCMP rules, the definition of 'Turnover' is particularly important as Turnover is used to determine the maximum wage-spend. Within a traditional accounting perspective, there are usually only three elements of turnover:
• Match-day Income
• Commercial Income (such as sponsorship)
• TV revenue (and any 'merit payments' based on league position)
Any profit made on player sales is included with in Turnover on a cash basis when the instalments are received.
Another key point to note... Player Wages and deductions.
Under SCMP, 'Wages' relates to player wages only (director remuneration and general club staff wages are not included in the SCMP calculation). Player wages included in the SCMP calculation relate to all contract players (full contract, non-contract, multiplicity etc.) and loan players. Wage costs for players loaned out to other clubs are deducted for the period of the loan.
Wage costs for Youth players on a professional contract are also excluded (i.e. players that have been in the club’s Youth Development scheme and have been given a pro contract); they must be 20 years of age or under at the start of the season to be discounted from the SCMP calculation.
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Mind if i add a couple of points to that
Turnover has no set definition and is often agreed by discussion with each club and EFL. The three categories are broadly correct but it doesn't necessarily have to be "football" income eg it could be other income that is guaranteed from investments or rents
Player sales are taken in to account net of player purchase costs in the period. Also included as a deduction from income calculation is the costs of loan players
Player direct costs take in to account including such things as benefits in kind (eg a car) and agents costs, less contributions received for loan deals after allowing for agents costs
Commercial income like, kit sales, hospitality or food & beverages is taken in to account after deduction of any direct costs associated with that income. eg the sale of a shirt less its cost to acquire for stock
SCMP is a calculation it doesn't mean that a club spends to that level, it may be they spend less simply because they don't have the cash flow to spend to the limit. eg if there were substantial overheads to be met and limited support available from the owners
The mix of player ages is important. Too many senior players could restrict the number of players in the total squad. Similarly having a lot of younger players keeps costs down, and could allow a couple of more expensive signings
I think i am right in saying new share issues are also taken into account but financial loans from owners or banks etc are not
I believe the calculation is subject to regular checks by the EFL and the starting calculation is based on the budgets set for a season ahead and adjusted throughout the season to reflect reality