Manchester City’s Financial Controversy: An Accountant’s Perspective

Steve Collings looks beyond the football headlines to examine the financial reporting, tax and audit issues at the heart of the case.

Another month, another scandal. This time, Manchester City Football Club is facing allegations that could have significant accounting, tax and even criminal consequences.

As we enter the fourth quarter of 2026, we start it with a potential storm brewing over the UK’s Manchester City Football Club (MCFC). Earlier this month, an Independent Commission found that the Premier League club had inflated its income and concealed expenses which it paid to a key individual through a sham consultancy.

Let’s just start by saying, at the time of writing, while the Commission’s findings of fact are correct, MCFC maintains its innocence and states that it intends to appeal – alleging material errors of law, principle and fact.

Independent Commission

The Commission’s findings span some 40 pages. It shows how MCFC’s owners, Abu Dhabi United Group (ADUG), knew as far back as the 2009-10 season that there would be significant overspends if the club were to get to the level it wanted to, and that it would need to grow its commercial operations and increase (very substantially) its commercial revenues.

The report states that at the time of the club’s acquisition by ADUG, its commercial revenue was a fraction of the revenue being generated by the top clubs in the Premier League, and more widely.

To that end, the Commission states that MCFC managed to find a way to boost sponsorship income for nine seasons. In addition, the club’s owners were topping up the deals, which of course, if true, were treated incorrectly as income rather than capital contributions.

Disguised Funding Scheme

The scheme is called the Disguised Funding Scheme and this is how it worked, according to the Commission:

1. The sponsorship deals were split into two parts: a base sum and a tagged sum.
2. The sponsors would pay the base sum. The club’s owners would pay the tagged sum.

So, the sponsors would not pay the full value of the sponsorship contract. Consequently, the Commission has found that these agreements were (as a matter of law) shams and/or arrangements whose economic substance was very different to the appearance given in the agreements themselves.

Effectively, MCFC has inflated its income by recording funding from its owner, ADUG, as sponsorship revenue (the tagged sum element). This boosted the club’s reported income by hundreds of millions across the 2009/10 to 2017/18 seasons.

The figures

An analysis was provided by the Commission:

Year	Total recorded sponsorship fees	Base fees paid by AD Sponsors	Tagged sums paid by ADUG
	£million	£million	£million
2009/10	27.0	4.5	22.5
2010/11	41.25	12.75	28.5
2011/12	86.75	16.0	70.75
2012/13	121.75	16.0	105.75
2013/14	127.5	16.0	111.5
2014/15	123.2	16.0	107.2
2015/16	136.17	16.0	120.17
2016/17	140.59	11.0	129.59
2017/18	145.73	11.0	134.73
Total	949.94	119.25	830.69

As you can see, of the £949.94 million recorded sponsorship fees, £830.69 million was recorded as revenue when, in fact, it should have been recorded as equity contributions from its owners.

MCFC denied there had been any Disguised Funding Scheme in operation. It argued that the Premier League had misunderstood how sponsorship agreements had been funded by the sponsors.

The Commission’s findings also state that the club hid expenses; omitting costs which did belong to the club, but which ADUG paid. These omitted payments understated expenses by some £8.866 million, £7.4 million and £500,000 for three individuals – and these involved a related entity referred to as Fordham in the Commission’s report.

Of course, inflated income and understated expenses give rise to questions about tax. Had MCFC paid too much tax? There is insufficient information in the public domain about that currently. However, what we do know is that the club’s losses meant they paid no corporation tax over the periods in question.

Remuneration issues

The Commission describes an arrangement under which remuneration for services contracted to be provided to MCFC by an individual, was instead recorded in a consultancy agreement between the individual and another party. The description is heavily redacted in the report but states that the contractual arrangement itself was a sham. But, if that conclusion is wrong, MCFC was the entity obliged to make the payments under the agreements and ADUG made them on the club’s behalf. Indeed, the terms should have been included in the individual’s contract with MCFC.

The name of the individual concerned (and their gender) has been redacted, but reports in the public domain name him as Roberto Mancini.

If it is Mancini, then it can be presumed that he was fully taxed on his income under his contract with MCFC. Of course, MCFC will have applied UK employment taxes – PAYE (Pay As You Earn) and National Insurance Contributions (NICs) – to his salary, as well as paying employer NICs on Mancini’s gross pay. Effectively, the position for Mancini’s consultancy agreement should have been the same. It’s impossible to make a salary untaxed by disguising it as a consultancy fee. If the payments were for Mancini’s work at MCFC, they would fall within scope of employment income and be subject to PAYE and NICs accordingly. Under UK law the UK’s HM Revenue and Customs (HMRC) will always look at what a payment is for, rather than what a payment is intended to be, or what a contract might refer to it as.

For example, sportsmen and women who have served a club for a specified period of time may be granted a testimonial. Once the testimonial has ended, the surplus from the testimonial is paid to the player. Subject to any exemption that may be applied in certain specific circumstances, those testimonial proceeds are treated as income from UK employment – on which PAYE and NICs will be payable to HMRC. The point here is that a payment can be employment income, even if it comes from someone other than the main employer.

Tax issues

I am not a tax expert, but the tax issues I have raised above are fairly basic level. Certain commentators suggest that Mancini could be non-domiciled and claimed the remittance basis, so that his foreign income was only taxed in the UK if he brought it here. However, that would not have made a difference given that MCFC in the UK was his main employer. Some commentators have also suggested that Mancini may not be resident in the UK.

However, the general consensus here is that MCFC should have applied PAYE and NICs on its payments to Mancini under the consultancy agreement in the same way that his earnings would have been taxed under payroll. I suspect all of this will eventually come into the public domain at some point.

Accounting issues

There are, of course, wider issues to consider where this debacle is concerned. The primary problem, from an accounting perspective, is whether MCFC has dishonestly falsified accounting documents.

Paragraph 101 of the Commission’s findings confirms that, in its opinion, the financial statements are materially misstated for income and expenses. Consequently, those signing the statements knew that they did not give a true and fair view (or were alternatively reckless).

Section 393 of the UK’s Companies Act 2006 requires the directors of a company to be satisfied that the financial statements give a true and fair view before approving them.

Section 414(4) states that a director can commit a criminal offence where non-compliant financial statements are approved – if the director knew (or was reckless about the non-compliance) and failed to take reasonable steps to secure compliance or prevent approval of those financial statements.

The report states that it found nine seasons’ worth of financial statements that failed to give a true and fair view, and that it was intentional. If that is proven, then there will be a strong case for a prosecution.

Audit

Then there are audit-related issues. Section 501(1) of Companies Act 2006 makes it a criminal offence to knowingly, or recklessly, give an auditor a materially misleading, false or deceptive statement where it concerns information or explanations the auditor required (or was entitled to require).

The findings suggest that the auditors were unaware of the Disguised Funding Scheme. However, this could well attract the attention of the regulators and also lead to an investigation into the audit of MCFC.