Leicester City could face a future points deduction after being charged with an alleged breach of the English Football League's financial rules.

The Foxes have been referred to an independent commission after being charged by the Premier League for an alleged profit and sustainability (PSR) breach for the year 2023-24, when they were in the Championship.

The new charge follows a lengthy arbitration process over who holds jurisdiction over Leicester, with the club bouncing between the Championship and Premier League in recent seasons.

A tribunal has now ruled the Premier League has the power to charge Leicester, who have been relegated from the top flight and will play in the Championship next season.

The timeline of the case should still come under the Premier League's 12-week fast-track process, meaning any possible points deduction, depending on the outcome of the case, could come in Leicester's season in the Championship in 2025-26.

But football finance expert Kieran Maguire told BBC Sport he believes it is unlikely a punishment would be imposed on Leicester while they are in the second tier because the Premier League and EFL are separate entities.

The independent commission will also assess two further alleged breaches by the Foxes; that they failed to provide accounts to the Premier League by 31 December, 2024, and that they did not "provide full, complete and prompt assistance to the Premier League in response to the league's inquiries".

What were Leicester's losses?

Premier League clubs cannot lose more than £105m over three years but the figure is reduced by £22m for every season a club spends outside the top flight.

Leicester's latest accounts showed a loss of £19.4m for the period ending 30 June, 2024.

In their 2022-23 accounts Leicester confirmed an £89.7m loss while in the 12 months up to May 2022 they lost a club record £92.5m.

Those figures do not take into account 'add backs' - costs such as building infrastructure and investing in women's football that the Premier League and EFL view as in general interests of clubs.

Leicester, who this season have been relegated to the Championship for the second time in three years, said: "The club intends to engage co-operatively in this matter now that the Premier League's jurisdiction has been established for the period ending FY24 [financial year 2024)."

In April last year, Everton were docked two points after an independent commission found the club had breached PSR by £16.6m for the three-year period to 2022-23 having already been hit with a 10-point penalty - reduced to six on appeal - a few months before for a 2021-22 breach.

Nottingham Forest were also given a four-point deduction in March 2024 for a breach.

What has happened and why can the Premier League do this?

At the centre of the tribunal decision were two contrasting decisions.

Leicester won an appeal in September 2024 against an alleged breach of Premier League PSR rules for the 2022-23 season.

An independent panel found the Premier League did not have the jurisdiction to punish the Foxes as the club had been relegated to the Championship when their accounting period ended on 30 June 2023.

The Premier League said at the time it was "surprised and disappointed" by the panel's decision, while Leicester said they had "simply sought to ensure that the rules are applied based on how they are actually written".

Tuesday's latest tribunal ruling said the jurisdiction decision on the 2022-23 case was wrong, but that it would not overturn it because it "was not a perverse interpretation of the law".

The Premier League tightened its rules, external in April so that clubs were still bound by its rules even if they were relegated.

The EFL said it noted the referral of Leicester to the independent commission, having passed the matter to the Premier League.

How did Leicester find themselves in this position?

There are various reasons why Leicester have lost so much money in previous years, which still leaves them vulnerable now given the three-year assessment period.

They lost nearly £90m in 2022-23 as the club fell from eighth to 18th, resulting in relegation, but it was also a reduction of about £30-35m in prize money given finishing positions in the Premier League table are worth about £3m.

They budgeted for a higher finish, budgets which chief executive Susan Whelan said were "entirely reasonable" given previous top-five finishes.

A lack of European football was another factor, with the club qualifying for the Europa League and going on to reach the Europa Conference League semi-final in 2022.

Significant changes in the management have also been costly with the departure of Brendan Rodgers, along with his backroom staff, in 2023 expensive.

Leicester have handed out big contracts to players and have therefore been unable to move some on and, despite managing to make a £74.8m profit in player sales in 2022-23, they still lost a huge amount.

The knock-on effect is still restricting them, with current manager Ruud van Nistelrooy only able to spend around £3m on defender Woyo Coulibaly in January, leaving the Foxes short on the quality needed for a relegation fight.

Analysis

Football finance expert Kieran Maguire

It does look as if the Premier League will now pursue a commission for an alleged PSR breach for the three years ended 30 June 2024.

The EFL could, separately, pursue a similar case against Leicester for the three years ended 30 June 2025 should Leicester's financial results end up exceeding the EFL PSR limit, which will be £83m over that period.

Leicester and Bournemouth have previously been found guilty of breaches of EFL PSR rules after they were promoted to the Premier League, and in both cases were given fines.

Had Leicester accepted a points deduction at the start of the season in relation to historic breaches it would not have made much difference to their relegation battle, although they would have potentially finished 19th instead of 18th and received £3m less prize money from the Premier League.

While the Premier League and EFL are in dispute over financial distribution, their willingness to co-operate more in terms of the rules and regulations relating to promoted and relegated clubs will make it more difficult for Leicester's original success in avoiding charges by either organisation harder to replicate.