Jurisdiction(s):
United Kingdom

HMRC v Hotel La Tour: Court of Appeal confirms VAT on professional fees for share sale irrecoverable; direct-attribution test applies; VAT grouping argument fails; fundraising route affects recoverability

Published on: 30 May 2024

Published by a LexisNexis Tax expert

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Article summary

Revenue and Customs Commissioners v Hotel La Tour Ltd [2024] EWCA Civ 564

What are the practical implications of this case?

This ruling may (potentially) touch any company that incurs professional charges when disposing of shares in a subsidiary. The FTT and UT had earlier ruled in HLT’s favour, suggesting that recoverability of VAT on fees tied to a share disposal turned on an objective review of how the sale proceeds were intended to be used, with the consequence that such costs were treated as overheads and the VAT deductible. Given the sizeable transaction expenses typically arising on share disposals, those outcomes attracted strong interest across many corporate groups. The CA, however, has overturned the FTT and UT, restating VAT’s character as a tax on transactions. In the CA’s view, whether input VAT bears a direct and immediate link to an exempt supply (and is therefore not recoverable) must be judged objectively, by reference to the true nature of the transaction. Consequently, if:

costs bear a direct and immediate connection to a share disposal (commonly covering most deal expenses), and
that share disposal amounts to a business activity (which will frequently be as assessed on an objective basis by reference...

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