Hearts in new cash crisis as £100k tax bill missed

MOIRA GORDON
Published on 05/06/2013 00:05

HEARTS say they require an immediate upturn in season ticket sales if they are to make it through the latest cash crisis unharmed.

The Tynecastle club have again incurred the ire of Her Majesty's Revenue and Customs due to an outstanding bill of £100,000. The PAYE settlement had been due on Monday and the club now have a week to raise the necessary finance or be served with a winding up order.

It is not the first time the club has been threatened with such action and it was only through fan donations and a successful share issue that they were able to pay off a £450,000 tax bill at the end of last year. They also had to draw up a repayment plan with the tax man regarding another £1.5 million bill. This latest delay will test the patience of HMRC but the club believe that a solution can be found.

"We are in dialogue with HMRC and expect to make the payment in the very near future," said a club spokesman.

But the delay has raised further concerns about the ongoing viability of the Gorgie outfit. Hearts are £25m in debt, with £15m owed to Ukio Bankas, who have already entered administration, and a further £10m due to parent company UBIG, who are on the brink of insolvency. With no cash assistance coming from Lithuania, they now need to find the money to pay HMRC and still ensure there is enough left in the pot to cover staff wages, which are due in less than a fortnight. And a club insider stressed that, unless season tickets sales are boosted, that might prove difficult.

If Hearts were unable to meet those costs they could face further sanctions from the Scottish Premier League, which could result in another transfer embargo or even a points deduction going into the new league campaign.

The club were forced to operate within tight transfer restrictions for the majority of last season as a punishment for the repeated late payment of wages to players and coaching staff. That ban was lifted at the end of the season but members of the SPL board are monitoring the current situation closely.

However, while some club insiders insist Hearts are moving closer to the point where they can operate self-sufficiently, there are concerns about the immediate cash-flow situation. Admitting that they have been forced to operate on a hand-to-mouth basis since former owner Vladimir Romanov stopped ploughing money into the club two years ago, they say that they are counting the cost of the sizeable May wage bill, which included all the players' bonuses and appearance fees, and the increased PAYE bill as a consequence. It is hoped that season-ticket sales will eventually bolster the coffers, but with no match-day income to offset outgoings, the club hierarchy are having a hard time juggling finances.

"Things will get better going forward because we have now lost some of the higher earners from the wage bill but the uncertainty over matters in Lithuania has hit us hard," admitted a club source, who confirmed that the contracts of most of the outgoing players have now expired. "Season-ticket sales are down on this time last year, meaning we will have to have another look at the budget for next season. I am sure we can raise the money due to HMRC within the necessary deadline and I would hope we can pay all the wages on the 16th but the honest truth is that without the fans buying more season tickets, I don't think anyone at the club can guarantee that."

Season-ticket sales have slumped by almost a third on last summer's tally, leaving the club struggling to balance the books. But, with the taxman breathing down Hearts' neck, outraged fans have demanded to know where the money has gone from tickets which have already been sold.

Some of it has already been swallowed up by last season's deficit. While the board had warned of a projected £1.5m deficit, much of that was addressed by the share issue which raised £1.1m. But, the loss of Rangers from the SPL came after the budget had already been drawn up, resulting in a shortfall of around £300,000, which was compounded by the team's subsequent lowly league placing. Having budgeted for a sixth-place finish, ending up in tenth left them approximately another £300,000 shy of pre-season calculations.

"Even towards the end of the season, attendances were higher than expected but there were discounted admission prices for several of those matches," added the insider. "The fans have been brilliant and I can understand how the uncertainty has been unsettling but without more season-ticket sales now we have literally no money coming in."

Season-ticket sales will help over the course of the campaign but it may not be the quick fix needed unless they are bought outright. A problem for the club is that many fans have subscribed to either the four-month or ten-month repayment plan with many still to pay their first instalment and several of those monthly payments as low as £30.

Taken from the Scotsman