Maximising opportunities in cost conscious times: S&W expands its VAT expertise for fintechs

Vicki Weston joined S&W this week as indirect tax partner. With over 20 years’ experience in VAT advisory, she has increasingly focused on high-growth financial services and crypto sectors, most recently as part of the fintech leadership team at KPMG. As she explains, now more than ever it’s vital that fintech and financial services businesses consider VAT.  

The majority of my career has been spent advising banking clients, but in recent years I’ve focused on fintech and crypto businesses. They’re fascinating companies to work with because they’re both fast-paced and resourced constrained. Many of these businesses have grown very quickly, and they’re stretched thin. There’s often no dedicated in-house VAT function and, in many cases, no tax function. That means there’s tremendous scope to add value. 

Businesses don’t have the time or resources to spend considering VAT. This can lead to missed obligations and unexpected liabilities, but also often means opportunities for VAT recovery and efficiencies are overlooked.  

At a time when fintechs are under intense cost pressure, due in part to increased compliance costs and an investment environment focused on long-term profitability rather than growth, optimising their VAT position can have a significant impact.  

Proactively considering VAT can help avoid unexpected VAT liabilities cropping up down the line, including the time and cost of dealing with HMRC enquiries reactively. It also often leads to a lump sum of cash through the door where claims are identified.  

By considering optimum structures upfront, businesses are armed with the information needed to make informed decisions. It can be costly, and in some cases impossible, to do so after the fact.  

The majority of companies I work with are financial services businesses. As a result of making exempt supplies of financial services, they cannot recover some or all of the VAT they incur on costs, so VAT represents a real cost to these businesses. However, many of these businesses are in fact paying more VAT on costs than necessary and recovering less VAT than they are entitled to.

There is often scope for savings, and we find many businesses sat on VAT claims, which can go back four years under capping provisions. It varies case by case, but it can be millions, and if you fail to act in time, it’s gone.  

VAT is a complex area and many fintechs simply don’t have time to keep on top of all of the changes, intricacies and requirements.

A common theme I still see with fintechs and crypto businesses is that they're so keen to expand into new markets and so focused on the product or solution that tax is often an afterthought.  

Last year, the Government announced investment in 5,000 new HMRC compliance officers and a tech-powered enforcement strategy to close the tax gap, which increases the likelihood of investigations. We’ve also seen a targeted focus on financial services by HMRC, with letters being sent to a number of taxpayers covering areas HMRC are interested in and where they consider VAT may be underpaid.

Alongside this, we’ve also had a number of important developments in VAT that taxpayers will need to be on top of, covering hot topics such as the VAT liability of bought-in services, including payments, which is particularly relevant to fintechs. Finally, we continue to see developments in cross-border and intra-group supply contexts, most recently yesterday’s CJEU ruling in Arcomet that could have a significant impact on the VAT treatment of transfer pricing adjustments.

In an environment where controlling costs and reaching profitability are important, VAT and tax optimisation are playing an increasingly important role. 

We bring specialist advice across service lines to fintechs and financial services businesses that’s proactive, pragmatic and commercially aware. It can save fast-growing businesses both time and money. Our tax and industry experience means we can help businesses determine what they need to look at and what their priorities should be, and help them to get there efficiently.