UK Supreme Court Confirms VAT Non-Recovery for Share Sale Fees

On Decmeber 17, 2025, the UK Supreme Court issued its judgment in the case between His Majesty's Revenue and Customs (HMRC), as respondent, and Hotel La Tour Ltd, as appellant. The case concerns whether VAT incurred on professional fees associated with selling shares can be recovered when the sale is used to finance taxable business activities.

Overview of the Case and the Court's Decision

In 2019, Hotel La Tour Ltd decided to fund the development of a new hotel in Milton Keynes by selling its Hotel La Tour Birmingham Ltd subsidiary and taking out a bank loan. In the process of selling the Hotel La Tour Birmingham, Hotel La Tour incurred professional fees of GBP 382,900 plus GBP 76,823 in VAT. The issues that led to the dispute with HMRC arose when the company sought to reclaim the VAT charged on those services.

The HMRC denied the repayment on the basis that the costs related to an exempt share disposal and therefore did not give rise to deductible input VAT, prompting Hotel La Tour to appeal to the First-tier Tribunal (FTT). The FTT ruled in favour of the Hotel La Tour, concluding that the professional fees had a direct and immediate link to the company's taxable business activities as a whole rather than to the exempt share sale, making the input VAT deductible. The Upper Tribunal agreed with this reasoning.

Nonetheless, the Court of Appeal overturned both decisions, holding that the relevant costs were directly linked to the exempt transaction and that VAT recovery was therefore not permitted, leading Hotel La Tour to challenge that conclusion before the Supreme Court.

The Supreme Court concluded that the professional services had a direct and immediate link to the sale of the shares rather than to Hotel La Tour’s overall business activities, and because that share sale was an exempt transaction, the related VAT was not deductible, thus confirming the Court of Appeal decision. 

Also, in its decision, the Supreme Court agreed with the Court of Appeal that both the FTT and the Upper Tribunal had misapplied existing case law by relying on the manner in which the share price was determined. Furthemore, the Supreme Court rejected Hotel La Tour’s reliance on recent Court of Justice of the European Union (ECJ) case law. 

Conclusion

The Supreme Court dismissed the argument that, because management services within the VAT group were disregarded, the share sale fell outside the scope of VAT. In contrast, the costs should be treated as linked to Hotel La Tour’s overall business. Consequently, the company’s appeal was denied, and HMRC's conclusion that VAT was not deductible on these costs was confirmed.

Source: UK Supreme Court - HMRC v Hotel La Tour Ltd