The EFL has published a useful guide to its current financial regulations and how they are to be enforced.
Championship clubs are subject to Squad Cost Rules (SCR) whose main goal is to ensure Clubs meet their financial obligations responsibly and prioritise sustainable, long-term growth. The rules limit how much a Club can spend on its playing squad and manager to a percentage of its income. They replace the Profit & Sustainability (P&S) Rules previously used from 2016/17 to 2025/26.
To be compliant squad costs must not exceed allowable income.
Allowable Income is made up of:
- 85% of a Club’s Relevant Turnover - includes things like sponsorship income, broadcast income, prize money, gate receipts and merchandise sales.
- 85% of a Club’s net player trading (transfer fees received minus transfer fees paid) - accounted for on a cash basis, which means transfer income is only counted when the cash is actually received by the Club.
- Owner equity injections (currently capped at £34m over three years, with no more than £16m permitted in a single season).
Squad Costs are made up of:
- Player wages & associated costs (permanently contracted players under the age of 21 do not count towards the calculation unless they are classed as an ‘Established Under 21 Player’.)
- Manager wages and costs - but not other coaching staff.
- Agent costs.
(Costs incurred through the day-to-day running of a Club’s Academy, spending on Academy facilities and education and welfare costs for young players are not included in the calculation.)
To give clubs time to adapt to the new rules, real-time monitoring of the SCR will not begin until the Winter Transfer Window of the 2026/27 season. Clubs have still been required to submit financial information before the start of the season and are expected to operate within the new rules, but player registrations will not generally require real-time approval until January.
As a result of the move to a cash-based system to calculate transfer income, there are transitional arrangements for Clubs that had already made financial commitments under the previous rules. Clubs that had already forward-financed transfer payments can continue to have those payments recognised in line with their existing agreements, rather than being disadvantaged by the change in approach.
Finally, a further transitional rule is in place to recognise the strong financial position built up by Clubs under the previous P&S Rules. Clubs that were comfortably within the loss limits set out over the previous two seasons of P&S have been permitted to carry forward a limited amount of that financial headroom into the new SCR equity allowance.
In order to monitor and enforce compliance with the SCR rules a separate department has been created - the Club Financial Reporting Unit (or “CFRU”). The team consists of qualified accountants and has been in place since March 2022. It acts independently of EFL Board influence or that from other parts of the EFL. The CFRU has delegated authority to review and decide on regulatory submissions and can also compel the provision of information and documents as part of its work.
If a Club breaches the Squad Cost Rules (SCR), a range of sanctions can be imposed depending on the severity of the breach. In the first instance, the Club may be placed under a player registration embargo, preventing it from registering new players or new contracts for existing players until it has demonstrated compliance with the rules.
Where a Club is forecast to exceed, or has exceeded, the SCR limit, the Club Financial Reporting Unit (CFRU) can require additional financial information, impose business plans or budgets, restrict further spending, require player sales and reject player registrations. More serious or confirmed breaches may be referred to the independent Club Financial Review Panel (CFRP), which has the power to determine further sanctions. The CFRP is an independent, multi-disciplinary group which makes determinations on matters concerning financial regulations. It includes members with accountancy, legal and football expertise. It is chaired by Mr Christopher Quinlan KC, with other members including Mr Nick Igoe and Ms Alison Royston (Football Members) and Mr Geoff Mesher and Mr Dan Jones (Audit Members).
Deliberately providing false or misleading information, concealing relevant details, falsifying records or attempting to evade the rules is treated as misconduct and can lead to immediate referral to the CFRP, an immediate embargo and additional disciplinary action.
The EFL document in full: