Manchester City face a £50m fine and having to limit their Champions League squad to just 21 players next season, instead of the normal 25, after breaching UEFA Financial Fair Play (FFP) rules, Sky News understands.
Under sanctions which the club are contesting, City will also have to cap their spending on Champions League players so it does not exceed this year’s total.
The reduction in the size of the Champions League squad to 21 could hit City hardest, as they will have to continue selecting eight “home-grown” players in the squad.
City are contesting the UEFA sanction, but if they do not agree to the sanctions, set out in an initial “settlement offer”, they face even stiffer penalties.
Final confirmation of the sanctions is expected on Friday, two days before City’s title-deciding game against West Ham at the Etihad.
Under the FFP rules, clubs are not permitted to lose more than £37m over two seasons unless they can show that losses have been incurred by investments in club infrastructure, including youth development, academies and stadium development.
In the two seasons tested by UEFA in 2011/12 and 2012/13, City’s combined losses were almost £150m, with a deficit of almost £200m in 2010/2011.
While some of those losses can be legitimately written off – for example City are building a £100m playing campus next to the Etihad Stadium – UEFA have concluded not all of their losses are legitimate under the terms of FFP.
UEFA also examine sources of revenue, which cannot be from “related parties” if they are to count as income for FFP accounting purposes. City’s £40m-a-year shirt and stadium sponsorship deal with Etihad, the Abu Dhabi state airline, has been scrutinised, though City says it was done at a fair market rate.
It is understood UEFA found some of City’s accounting in their original submission to be less transparent than expected, which has prompted a closer look at all the figures.
City have been on collision course with UEFA over FFP ever since the club’s Abu Dhabi owners embarked on an unprecedented spending spree after buying the club in August 2008.
Since then, they have spent more than £600m on transfer fees, winning the FA Cup in 2011, the Premier League in 2012 and the League Cup this season. They require just four points from their remaining two games to be almost certain of winning the league this year.
Paris St Germain, backed by Qatari wealth, have also fallen foul of the FFP rules and face similar sanctions.