Kieran Maguire, a football finance expert, has explained exactly how Everton breached the Premier League's profit and sustainability rules (PSRs), sending Chelsea a clear warning. The Toffees were deducted 10 points, plunging them into the relegation zone.

The Premier League made a complaint against Everton and referred the case to an independent commission earlier this year. During proceedings, the Merseyside outfit admitted that they were in breach of the competition's PSRs for the period ending the 2021/22 campaign.

Following a five-day hearing last month, the commission decided that Everton's PSR calculation resulted in a £124.5million loss which exceeds the threshold permitted. As a result, a 10 point deduction was imposed immediately, leaving Sean Dyche's side with just four points after 12 games.

The sanction sent shockwaves across the country; social media users quickly pointed fingers at Chelsea, who have spent almost £1billion on new players alone since Todd Boehly's arrival in May 2022. The west Londoners have not been charged regarding alleged irregular payments.

Speaking on 'The Price of Football' podcast, Maguire explained how Everton incurred a point deduction. He said: "Football clubs in the Premier League are allowed to lose £15m over a three-year period, but if the owner puts money in through the form of shares, the first £90m of that counts towards your PNS calculation, so therefore £15m plus £90m becomes £105m.

"Now included in that £105m is that clubs are allowed to make adjustments, or to use a better phrase, virtue spending. If the club spends money on infrastructure, so Everton have a new stadium or if you've got an academy scheme that's exempt, if you've got a women's team that's exempt.

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"If you are putting money into your community scheme, that is exempt and we've said on many occasions that Everton, in my view, is the best, if not one of the best community schemes and the work that it does is absolutely fantastic. So all of those costs are adjusted for.

"There's a further complication in that this is normally assessed over three years, but because of COVID, what happened was that 2019/20 and 2020/21 were added together and then halved and that was treated as a single year. So, that created a further adjustment.

"Based on these figures Everton's accounting loss was £287m. Then we started to work back in terms of these adjustments and I think this is where the case stands or falls in terms of which side of the line Everton are on."

Similarly to Everton, Chelsea are exploring ways to improve supporters' matchday experience, whether that be renovating the stadium or simply building a new one. Later on 'The Price of Football' podcast, Maguire explained the risks of borrowing money for such large investments.

The finance expert said: "Everton are building a new stadium at Bramley Moore Dock and what you are allowed to do under the accounting rules is that if you borrow money to help you build the stadium then the interest on those borrowings can be concluded as part of the cost of the stadium.

"And the reason why that's important is that if it's included as part of the cost of the stadium then it's excluded from the Financial Fair Play calculations the issue in respect of Everton was that they borrowed effectively from three sources. They borrowed from the owner and the owner didn't charge any interest. So this is Farhad Mashiri.

"Then they borrowed from Metro Bank like they borrowed around about £26m now Metro Bank did charge interest, but in the loan application and in the documentation from Metro Bank, it said this money is for working capital and this money is there to pay the wages.

"They also borrowed from an organisation called Rights and Media Funding. They borrowed over £120m and again, this was for working capital, so in both cases there was no mention of the stadium. Those monies were paid into Everton's Normal Bank account and what Everton have done is they've said sort of retrospectively some of the interest is effectively now going to be allocated to the stadium.

"The argument put forward by the Premier League, and this really sort of is the major issue, was that will hold on. You've done that retrospectively - it's a misleading presentation by Everton to the Premier League as far as the submissions by Everton and I think this formed part of the reason why the Premier League decided to charge Everton in the first place."