Yes, I’m a Hearts fan and something has been gnawing away at me since the HMRC v HMFC tax case.
This is my understanding of the situation.
Kaunas, at the start of Romanov’s reign, loaned players to Hearts. All of these players had played for Kaunas and were registered Kaunas players therefore these players were entitled to be loaned to Hearts under existing football and tax rules (or were they?)
The problem seems to have arisen from the multitude of players who arrived at Hearts having been signed by Kaunas, having never received a wage let alone represent Kaunas on the pitch, and were immediately loaned to Hearts.
Again, it’s my understanding that HMRC deemed these players to be solely Hearts players (quite right too in my opinion. This is no rant at perceived injustices like someone else I might mention…oh ok….our “historical” cousins).
HMRC demanded that Hearts pay the full amount of tax to themselves. Of course Hearts and HMRC have come to an arrangement to pay this back (again, quite right).
Now, for argument’s sake, let’s say the salaries of these players were split 50/50 between the two clubs. Therefore the tax would be split 50/50. (Assuming tax in Lithuania is on a par with the UK)
This throws up a conundrum.
Have Hearts, in effect, paid the tax on the 50% Lithuanian side of things twice? It would seem to me that they have. Firstly, to the Lithuanian tax authorities in run of the mill PAYE (or the Lithuanian equivalent) payments (there has been no intimation anywhere that tax wasn’t paid to the Lithuanian authorities) and secondly, to HMRC via their agreement.
If this is indeed the case what chance Hearts can get this money back from the Lithuanian government. (It’s OK; I think I know the answer)
It does throw up an interesting scenario though.
With the Hearts situation taking second billing to the main event it’s quite hard to get detailed info. The above, as I have said, is only my (and other Hearts fans) understanding of things. We could be (and probably are) wrong. If we are wrong, any info would be great.
Posted by CDS