Hearts agree £1.5m deal with taxman
A MAJOR threat to the future of Hearts has been lifted after the club struck a deal with HMRC over their tax debt, the Evening News can reveal.
Tynecastle chiefs have agreed to repay
£1.5 million to the tax authorities following a dispute over player loans from Lithuanian club Kaunas, which after interest and penalties could have landed the club with a massive £4m bill.
The final settlement is now £250,000 lower than the £1.75m originally sought by Her Majesty’s Revenue and Customs – a figure which could have risen by millions from interest and hefty fines.
But, under the terms of the deal, Hearts will pay £500,000 annually to the tax man over the next three years, with the first instalment due in May. They will face no penalties and the tax tribunal, which began in November, has been concluded without any evidence being heard.
The club were being chased for £1.75m in unpaid tax which may relate to benefits given to any of the 19 players loaned from Kaunas to Hearts between 2005 and 2010. Both clubs were financed by Vladimir Romanov’s Ukio Bankas Investment Group at the time.
Many players loaned from Kaunas were paid 50 per cent of their wages by the Lithuanian side and 50 per cent by Hearts. Tax was deducted from both amounts each month.
The total payout for outstanding tax and National Insurance contributions now amounts to £1.2m plus interest charges of £300,000.
The news comes a day after Hearts paid off £450,000 in tax liabilities, which at one stage threatened to put the club out of business.
Club director Sergejus Fedotovas said he was satisfied the resolution meant the club could now “move forward with certainty”.
He said: “We believe that the payment terms agreed with HMRC allow the club to manage repayments in a way that will not be detrimental to longer-term development of the club.”
HMRC refused to comment on the case due to “customer confidentiality rules”.
Former Hearts chairman Lord George Foulkes said: “This is good news for the Revenue and the taxpayer, as there would have been no money if the club had been forced into liquidation.
“As for Hearts, it’s great news as it allows the club to organise its finances while continuing to look for a new owner.”
The news was also welcomed by football finance expert Neil Patey, of Ernst & Young, who said: “This shows how HMRC are prepared to be flexible when clubs and companies cooperate with them.
“It has worked out very well for Hearts as they benefit from a reduced amount and are also allowed some flexibility.”
Last month, the club revealed they faced a winding-up order over unpaid VAT and PAYE totalling £449,692.04. Initially, the cash was to be paid within eight days until a payment plan was agreed, giving the club until the close of business yesterday to pay the bill.
A fans share issue, launched to raise £1.79m in exchange for ten per cent of the club’s shares, hit almost £700,000 last week.
It is understood cash raised through the recent scheme will not be used to pay the big tax bill and the club must wait at least a year before launching another share issue.
A club spokesman said: “The final figure is lower than the amount assessed by HMRC of £1.75m, excluding interest and penalties and brings to an end a contingent liability that has been highlighted in the club’s annual accounts since 2009.”
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Weather for Edinburgh
Saturday 18 May 2013
Temperature: 9 C to 13 C
Wind Speed: 18 mph
Wind direction: North east
Temperature: 9 C to 18 C
Wind Speed: 8 mph
Wind direction: North east