IntegraFin, the parent company of Transact, has requested a review of a HM Revenue & Customs decision to remove part of its business from a UK VAT group which would land the firm with a £9.8mn bill.
In an announcement today (June 21), IntegraFin said the government department had contacted the firm this week informing the business it intends to uphold an original decision to exclude its software development subsidiary, IntegraDev, from a VAT group.
Integrated Financial Arrangements, the subsidiary which operates Transact’s wrap service, has requested a review of the decision by a HMRC officer “not previously involved with the matter”.
IntegraFin’s share price was down nearly 4 per cent this afternoon. The parent firm’s share price has more than halved over the past six months.
The termination of IntegraDev’s membership, if set in motion, would be dated back to July 4, 2016, meaning IntegraDev could be subject to five year’s worth of reverse-charge VAT.
According to the company, it is being presented with two VAT bills. One is back-dated for the period July 4, 2016 to September 30, 2021 totalling £7.9mn. While the second is due for the financial year ending September 2022, totalling £1.9mn.
In its annual financial results published in December, Integrafin said its directors “did not believe it would be appropriate” to recognise a provision for the potential termination and consequent tax bill at that time.
It cited ongoing uncertainty around the final decision, as well as an uncertainty as to whether HMRC will charge interest and/or a penalty if the appeal to the notification was unsuccessful.
“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,” it said in December.
HMRC sent the original notice to IntegraFin in January 2020, when the bill ran to October 2019 and totalled £4.3mn. The government department said in the notice that the additional ongoing VAT charge would be around £1.4mn.
The platform provider owner contested this on January 28, 2020. Now it has one last attempt left to challenge the decision.
ruby.hinchliffe@ft.com
