Nottingham Forest have been deducted four points by the Premier League for breaching profit and sustainability rules (PSR).

The East Midlands side will now drop from 17th place into the relegation zone on 21 points, one behind Luton Town who will rise out of the bottom three.

A Premier League statement on Monday read: “An independent Commission has applied an immediate four-point deduction to Nottingham Forest FC for a breach of the Premier League’s Profitability and Sustainability Rules (PSRs) for the period ending Season 2022/23. 

“Nottingham Forest was referred to an independent Commission on 15 January, following an admission by the club that it had breached the relevant PSR threshold of £61 million by £34.5 million. The threshold was lower than £105 million as the club spent two seasons of the assessment period in the EFL Championship. The case was heard in accordance with new Premier League Rules, which provide an expedited timetable for PSR cases to be resolved in the same season the complaint is issued.

“The independent Commission determined the sanction following a two-day hearing this month, at which the club had the opportunity to detail a range of mitigating factors. The Commission found that the club had demonstrated ‘exceptional cooperation’ in its dealings with the Premier League throughout the process.”

Forest’s own statement read: “Nottingham Forest is extremely disappointed with the decision of the Commission to impose a sanction on the Club of four points, to be applied with immediate effect.

“Notwithstanding our disappointment, we thank the Commission for agreeing to deal with this matter on an expedited basis. The Club considers it to be essential for the integrity of the league to have charges resolved in the season in which they are issued.

“We were extremely dismayed by the tone and content of the Premier League’s submissions before the Commission.”

The Guardian were first to report Forest admitted to the breach but are still likely to lodge an appeal.

Forest’s defence is said to have revolved around the sale of academy product Brennan Johnson. They could have sold him to Brentford last summer before June’s PSR deadline, but thought they could extract a higher fee beyond it instead.

The Wales winger was sold to Tottenham Hotspur on deadline day for £47.5m and argued their approach to selling him was with sustainability in mind, but an independent panel dismissed Forest’s defence. Forest also argued that their losses were due to vital investment in the playing squad in order to survive relegation.

Forest are not the only side to have faced punishment for PSR breaches this season. Everton were initially deducted ten points for their own offences, but this was reduced to six on appeal. The Toffees are still awaiting the verdict of another charge and could be deducted further points.

Both Forest and Everton remain mired in a battle against relegation, with Nuno Espirito Santo’s side now a point from safety behind Luton. Sean Dyche’s men sit 16th on 25 points, with Brentford one point ahead of them.