Chelsea have rejected the chance to sign Jadon Sancho permanently from Manchester United after the winger failed to agree personal terms at Stamford Bridge, reports said on Tuesday.
The 25-year-old joined Chelsea on loan in August last year in a deal that featured an obligation to buy him for up to £25 million ($34 million).
The Athletic reported that the club and Sancho had failed to agree a deal and Chelsea must now pay a £5 million penalty charge to United.
Chelsea finished fourth in the Premier League and won the Uefa Conference League, with Sancho scoring the third goal in last week's 4-1 win against Real Betis.
But the England international has had an inconsistent season, scoring just five times and making 10 assists in 41 appearances for Chelsea.
He scored just one Premier League goal after early December.
When asked about Sancho's future following last week's Conference League victory in Poland, Chelsea boss Enzo Maresca said: "From now on we are going to sit with the club and decide what happens for next year."
Sancho, whose contract at United runs until 2026, will return to Old Trafford. The club have an option to extend the deal by a further year.
The forward joined United from Borussia Dortmund for £73 million ($98 million) in 2021 but failed to live up to his price tag.
He was involved in a public spat with former United boss Erik ten Hag early in the 2023/24 season and did not make another appearance before being loaned to his former club Dortmund.
He played once for United in the 2024/25 season, in the Community Shield in August, before making the switch to Chelsea.
Chelsea on Monday announced the signing of Portuguese midfielder Dario Essugo from Sporting Lisbon in a deal worth £18 million.
The 20-year-old will be available to feature for the Blues at the Club World Cup later this month.