Spotlight – Newcastle nets transfer bonus

Newcastle United finance director Les Wheatley will have cause to thank chancellor Gordon Brown when reporting interim results next week.

The interims are due at a time when the club has yet to hear whether cable operator NTL will follow through with a #160m takeover bid – subject to trade secretary Stephen Byers’ approval of BSkyB’s bid for Manchester United, whose FD David Gill will also announce interim results next week.

Although Newcastle is expected to report a loss, the Inland Revenue’s Budget concession that clubs will not have to restate the value of players’ transfer fees will help Newcastle clarify its tax regime. Alan Shearer’s #15m contract alone, amortised over five years, would have added #3m to the club’s tax liability if shown on the balance sheet according to FRS 10.

‘We are a club with considerable tax losses and were in danger of losing them under FRS 10,’ says Wheatley.

Newcastle is in the process of redeveloping its stadium and the uncertainty over potential FRS 10 tax liabilities is affecting the club’s ability to raise the necessary finance, says Wheatley.

‘Whether you are a taxpayer or not can have an effect; and the big problem was not knowing,’ he adds. ‘The concession was a good result for us because we can now get to grips with cashflow projections.’

The club can now go back to financiers and get them to examine the risks on more solid figures, says Wheatley.

Even though the FRS 10 decision will make life simpler, Wheatley says the offsets that result will plunge him into another problem area: deferred tax. Not to mention that bid from NTL.

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