FTSE listed IntegraFin Holdings plc has been told by HMRC that a decision over VAT group status stands and the company faces a multimillion pound settlement
In a statement to the London Stock Exchange, IntegraFin Holdings, a subsidiary of investing platform Transact, said that it contests the decision and has asked HMRC for a review by an HMRC officer not previously involved with the matter.
The long-running dispute relates to VAT group status for a company subsidiary, Integrated Application Development Pty Limited (IAD). In a decision in January 2020, HMRC rejected the basis for membership of a UK VAT group, which was terminated with effect from 4 July 2016.
As a consequence of the exclusion of IAD from the UK VAT group the services provided by IAD would be subject to reverse-charge VAT.
This meant that the software services provided from the subsidiary in Australia became subject to reverse-charge VAT.
Integrated Financial Arrangements Ltd, a subsidiary of IntegraFin Holdings, requested a review of HMRC's decision.
In a statement to the LSE, IntegraFin Holdings stated: ‘Yesterday the company received notice from HMRC that it had completed its reconsideration and would uphold its original decision, which is subject to a further review.’
The outcome of the decision means that the company faces a significant VAT bill covering the period 4 July 2016 to 30 September 2021, amounting to VAT of up to £7.9m.
The potential VAT due for the financial year ending 30 September 2022 is calculated at £1.9m. There would then be a potential ongoing annual VAT charge.
IntegraFin had previously revealed in its financial statements for the year ended 30 September 2021 a contingent liability for the potential payments to HMRC but had expected the VAT to be calculated at £4.3m.
The annual report for year end 2021 stated: ‘Due to the ongoing uncertainty around the additional VAT charges, pending the outcome of the dialogue with HMRC, the directors do not believe it would be appropriate to recognise a provision in these financial statements.
‘Payment of the additional VAT charges is considered to be less than probable and this is supported by both the original VAT advice received from specialists when the VAT Group was created, and subsequent specialist advice following HMRC’s challenge in January 2020.’
The company continues to take senior counsel's advice throughout this process.