Commissioners for His Majesty’s Revenue and Customs v Hotel La Tour Ltd [2025] UKSC 46

Hotel La Tour Ltd sought to recover VAT on professional fees incurred for selling shares in its subsidiary to fund a new hotel development. The key issue was whether input VAT on costs related to an exempt share sale could be deducted when the proceeds funded taxable economic activities.

Facts

Hotel La Tour Ltd (HLT) owned all share capital in Hotel La Tour Birmingham Ltd (HLTB), which leased a luxury hotel. HLT provided management services to HLTB. In mid-2015, HLT decided to construct a new hotel in Milton Keynes, financing this by selling HLTB and borrowing the shortfall from a bank. At the time of sale, HLT and HLTB were in a VAT group.

HLT engaged third parties to provide professional services assisting with the share sale, including market research, buyer shortlisting, financial modelling and tax compliance. Professional fees totalled £382,900 plus £76,823 VAT. HLT filed a VAT Return seeking repayment of this input VAT.

Issues

The central issue was whether HLT could recover the VAT on professional fees incurred to assist with the sale of shares in its managed subsidiary. Specifically, the question was whether the direct and immediate link was between the inputs and HLT’s taxable general economic activities, or with the exempt share sale.

Procedural History

First-tier Tribunal

HMRC concluded HLT was not entitled to repayment of the input VAT, upholding that conclusion on internal review. HLT appealed to the First-tier Tribunal, which allowed the appeal, holding that the direct and immediate link was between the inputs and HLT’s taxable general economic activities rather than the exempt share sale. The input VAT was therefore deductible.

Upper Tribunal

The Upper Tribunal upheld the FTT’s conclusion on appeal.

Court of Appeal

The Court of Appeal overturned the decisions of the FTT and Upper Tribunal, allowing HMRC’s appeal.

Judgment

The Supreme Court delivered judgment on 17 December 2025. The panel consisted of Lord Briggs, Lord Hamblen, Lord Leggatt, Lady Rose, and Lord Richards.

Implications

This case has significant implications for VAT recovery on costs associated with exempt transactions, particularly share sales. It addresses the application of the direct and immediate link test in determining whether input VAT on professional fees can be attributed to taxable economic activities or must be treated as costs of an exempt supply.

Verdict: Judgment given on 17 December 2025. The specific outcome regarding whether the appeal was allowed or dismissed is not explicitly stated in the provided text.

Source: Commissioners for His Majesty's Revenue and Customs v Hotel La Tour Ltd (UKSC/2024/0086)