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In a unanimous judgment, the UK Supreme Court has given final
\nconfirmation that VAT incurred on adviser fees connected with an
\nexempt share sale is not recoverable, endorsing the Court of
\nAppeal’s strict application of the “direct and immediate
\nlink” test. The decision brings finality to an area that had
\ngenerated uncertainty following earlier tribunal decisions.<\/p>\n
The case concerned Hotel La Tour Ltd (HLT), which sold the
\nshares in its subsidiary, Hotel La Tour Birmingham Ltd (HLTB), an
\nentity owning a hotel. The sale was undertaken to raise funds for
\nthe development of a new hotel business that would carry on VATable
\nactivities. In connection with the share sale, HLT incurred VAT on
\na range of professional services, including legal, financial, tax
\nand commercial advice aimed at identifying buyers and maximising
\nsale proceeds.<\/p>\n
HLT sought to recover the input VAT on those adviser fees,
\narguing that the costs were sufficiently linked to its wider
\nVATable activities. HMRC disagreed, contending that the costs were
\ndirectly attributable to the VAT exempt sale of shares and that the
\nVAT was therefore irrecoverable.<\/p>\n