CELLO Group, the owner of The Leith Agency, Blonde Digital and public relations firm Stripe Communications, has said the scope of a VAT review by HMRC may be wider than previously thought.

Previously Cello said it could have to pay between £1 million and £2m after it disclosed that one of its subsidiaries may not have charged VAT appropriately on certain items provided to charity clients.

Now the company has said the maximum potential liability could be greater than that as HMRC has widened the range of its soon to be launched review.

However the AIM-listed business said: "Given professional advice received on the nature of the items concerned, the likelihood of this further increase in liability is considered to be remote by the group.

"The group intends to robustly defend its historical position on this issue which it believes has been in line with received historical industry-wide practice."

Cello, which employs around 190 people in Scotland, also indicated that any backdated VAT assessment could be "substantially recoverable" from clients.