Sheffield Wednesday to sacrifice Grant to exit embargo

The Yorkshire Post has also learnt the club's cashflow problems stem back at least six months to when Wednesday were unable to meet an outstanding bill for VAT.

The Owls still owe 250,000 in unpaid VAT but hope to pay 300,000 in outstanding PAYE and National Insurance by the end of the week.

Manager Alan Irvine last night said he was unhappy with the fee Wednesday are set to receive from Burnley for Grant, believed to be in the region of 1m, but he understood the reasons for the goalkeeper's sale.

Payment of PAYE is critical under Football League rules which stipulate that any club that fails to pay its PAYE bill in full within 28 days of the due date is immediately subject to a transfer embargo. The rule was brought in last year with the aim of stopping clubs building up unmanageable levels of debt.

It has emerged the Owls were first hit with an embargo towards the end of June because of non-payment of PAYE.

Club chief executive Nick Parker said payments were brought up to date in time for the July transfer window, allowing the embargo to be lifted and Wednesday to sign players – including Republic of Ireland striker Clinton Morrison who had been released by Coventry.

But he said when the Owls again fell more than 28 days behind the due payment date last week they were hit with a second embargo which will remain in place until the 300,000 PAYE bill is paid.

The club insists the signing of eight new players during the summer complied with Football League rules, with the signings made outside the embargo periods.

Wednesday plan to use money raised from Grant's sale to Burnley to settle the PAYE debt, enabling the embargo to be lifted and giving the Owls the opportunity to sign a replacement goalkeeper.

Irvine said: "Personally, I am not happy with the fee but I understand the circumstances. I won't argue with the decision because there are outside influences which affect the decision. The money is important for the club's future and that's the most important thing. It is a difficult time for us and that has been good luck for Burnley."

The Owls' boss denied former Manchester City goalkeeper Nicky Weaver is a likely replacement when the embargo is lifted.

Wednesday have also turned down a 350,000 bid from Nottingham Forest for winger Jermaine Johnson but remain under pressure to sell again.

However, Irvine said: "If anyone thinks there is a sale on at Sheffield Wednesday, they will get a surprise. We will not take derisory offers for any of our players.

"I respect and fully understand the decision to sell Lee but that doesn't mean everyone is for sale."

Meanwhile Parker insisted the club would be able to meet its future tax obligations during the coming season. He said the club was currently negotiating with HMRC over the outstanding VAT bill, much of which was created by Wednesday's decision to start selling season tickets for the coming season much earlier than previously.

It is understood that HM Revenue and Customs' decision to issue a winding up petition last month was largely borne of frustration over the long-term VAT debt.

As it stands, the club still faces a potential winding up order and administration if the club does not pay all its tax debts before it is due to appear at the High Court on August 11.

But Parker said "the situation is under control" and the 250,000 VAT bill would be paid off, ideally through a negotiated settlement to spread payments.

He said: "There's no need to pay the VAT until August 11 but we are hoping to come to an agreement with the taxman before then."

Asked about the transfer embargoes, he said: "It didn't really matter for us in June because we couldn't sign players until July.

"We paid off just before the start of July so we could then make transfers."

Parker said he expected the second transfer embargo to be lifted later this week once the outstanding PAYE was finally paid off.

He refused to divulge any further information on new American interest in a takeover of the Owls. After a series of false dawns with previous takeover bids, including one from Chicago-based Club 9 Sports, the club believes the latest approach does have substance.