Jurisdiction(s):
United Kingdom

UK Supreme Court clarifies VAT: fees for exempt share sale irrecoverable; downstream purpose irrelevant; VAT grouping failed (Hotel La Tour v HMRC)

Published on: 18 December 2025

Published by a LexisNexis Tax expert

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Article summary

Hotel La Tour Ltd v HMRC [2025] UKSC 46

The appellant, HLT, held the share capital of its subsidiary, Hotel La Tour Birmingham Ltd (HLTB), which managed a hotel in Birmingham. That company was sold in part to help fund the build and development of a new hotel in Milton Keynes, with the remaining deficit met through a bank loan. HLT incurred professional costs of £382,900 plus £76,823 VAT, and the central question was whether that VAT could be recovered. HMRC denied the input tax deduction on the basis that the expenditure was linked to an exempt share disposal.

HLT (broadly) contended that the inputs were deductible because, as a matter of fact and law, the relevant output to which the services were most closely connected was not the exempt share transaction, but its wider hotel trading business, consisting of taxable supplies. The First-tier Tax Tribunal (FTT) had previously ruled in HLT’s favour, holding that there was a direct and immediate connection between the professional fees incurred and HLT’s taxable general economic activities, rather than the sale of shares...

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