The Smart Parking Ltd (ASX: SPZ) is rocketing today after the company announced a favourable outcome on its United Kingdom VAT matters.
During late afternoon trade, the parking technology company's shares are up 14.8% to 15.5 cents.
Let's take a look at what's driving the Smart Parking share price higher.
What did Smart Parking announce?
In today's release, Smart Parking advised that it has reached settlement with Her Majesty's Revenue and Customs (HMRC) on the administration of parking breach notices. The company noted a series of adjustments as a result of the settled dispute. They are as follows:
- HMRC to withdraw assessments raised in August 2019 for $3 million which were provided for in the FY19 accounts;
- HMRC to refund an overpayment of input VAT of $2.9 million;
- Smart Parking to write back its profit of $6.9 million in the prior year input VAT. This consists of reversal of a $4 million provision in the FY20 accounts for unpaid input VAT, and a cash refund of $2.9 million for overpaid input VAT;
- Smart Parking to withdraw notices of appeal that had been lodged in relation to the matter; and
- Smart Parking to restrict input VAT on a small number of leased sites where the company acts as principal.
Smart Parking noted that its pre-tax profit would receive a boost going forward as a result of the applied adjustments. This is due to the agreed method of calculating VAT, which will positively impact the company's bottom line.
Smart Parking further stated that if the new method had been implemented across its entire FY20 year, then pre-profit tax would stand $1.7 million higher. The company said that looking ahead, regardless of expanding customer base, customer mix and government lockdowns, there will be significant annual benefits of pre-tax profits.
Smart Parking share price snapshot
Over the last 12 months, the Smart Parking share price has been a weak performer due to the negative impact caused by COVID-19. The company's shares hit a low of 7 cents last March before slowly working their way back up to sit today 20% down on pre-pandemic levels.
