Hearts face £1.75m tax bill at HMRC tribunal

Published on 26/10/2012 23:54

HEARTS face a potentially devastating confrontation with Her Majesty’s Revenue and Customs next month, with the club having been issued with a demand for unpaid taxes of approximately £1.75 million.

The scheduled November tax tribunal has come about as a result of an ongoing dispute between the club and HMRC relating to players loaned to Hearts by Lithuanian club FBK Kaunas – then controlled by Hearts owner Vladimir Romanov – during the past seven years.

Only a fraction of the salaries earned by those players was met by Hearts but, according to HMRC, tax on the players’ full salaries should have been paid in the United Kingdom and not in Lithuania.

The news comes hard on the heels of Hearts being hit by a 60-day transfer embargo by the SPL in the wake of their latest failure to meet players’ salaries on time, and will set more alarm bells ringing among supporters.

However, any comparison with the employee benefit trust scheme at Rangers which remains under examination by the SPL is well wide of the mark according to Hearts, who have pledged to fight their case – claiming that the situation with the Lithuanian players was no different to any loan player agreement when the bulk of wages can be met by parent clubs.

Hearts launched a share issue earlier this week looking to raise £1.79 million from fans who would then assume a ten per cent stake in the club, and the more cynical among the club’s supporters may point to the proximity of that figure to that which HMRC claims is owed to them. The club, though, view the comparison as nothing more than coincidence.

A breakdown of the share issue on the official Hearts website - published last night - includes reference to the tax case as a potential risk and states that the club’s directors are attempting to “robustly defend” the claims by HMRC, but warns “the burden of proof is on the Company and the tax will be payable unless the Company is successful in challenging the claims”.

Should the tribunal’s decision go against Hearts, the website statement adds that such a scenario “could have a dramatically negative effect on the Company”. With Romanov’s Ukio Bankas Investment Group reportedly no longer willing to meet any financial shortfall at the club, Hearts look likely to view the forthcoming tribunal with justifiable foreboding.

Despite assurances in the football club’s annual report, Ubig is apparently now unwilling to meet any financial shortfall; Hearts are currently subject to a transfer embargo from the SPL because of the late payment of player wages.

Hearts’ present salary bill is thought to be in the region of £7m per year, with the club looking to halve that burden. A string of their highest-earning players, including Marius Zaliukas, Andrew Driver and Andy Webster, will run out of contract at the end of this season