Hearts vow to defend HMRC tax claims

The Tynecastle club will face a Her  Majesty’s Revenue and Customs (HMRC) tax tribunal next month over players loaned from Lithuanian club FBK Kaunas to Hearts, dating back to seven years ago.

The hearing is scheduled to take place for 11 days next month and HMRC claim that tax on the full salaries of the players in question should have been paid in the United Kingdom rather than in Lithuania, where taxation levels are lower. The players in question would have earned thousands of pounds, but only a small fraction of the money was paid by Hearts, with Kaunas making up the rest.

The news comes a day after Hearts launched a share issue seeking £1.79m from supporters in exchange for 10 per cent holding in the club. In a brochure released to fans, Hearts go into more detail in the “risk factors” section about the HMRC claim, indicating that Heart of Midlothian plc are in a “significant ongoing dispute” with the tax authorities.

It read: “Heart of Midlothian plc. are subject to a significant ongoing dispute with HM Revenue & Customs (“HMRC”) which, if it ultimately goes against the Company, could have a dramatically negative effect on the Company. Specifically, HMRC has claimed unpaid tax liabilities of circa £1.75 million (excluding interest and penalties) in relation to the arrangements between the Company and Kaunas FC in relation to certain players who were loaned to the Company by Kaunas FC.

“The Directors are attempting to robustly defend those claims but the burden of proof is on the Company and the tax will be payable unless the Company is successful in challenging the claims.”

At the time of the loans, Hearts’ majority shareholder Vladimir Romanov was at the helm of FBK Kaunas. The Gorgie club say that situation was no different to any normal loan player deals, when players’ salaries are still paid by parent clubs.