On 26 January 2026, the UK Supreme Court ruled that VAT incurred on adviser fees for an exempt share sale is not recoverable. The decision applies a strict two‑stage test, rejecting the modified approach that allowed recovery based on intended use of proceeds. The ruling closes the possibility of treating such costs as general overheads to fund taxable activities.
The Court confirmed that VAT incurred on adviser fees connected with an exempt share sale is not recoverable.
The Court established a strict two‑stage test: first, assess whether costs have a direct and immediate link to a specific transaction; if not, consider whether they relate to the taxpayer's general economic activity.
No, the Court rejected the modified approach that permitted recovery based on the intended use of the proceeds.
The ruling closes the door on treating such costs as general overheads, confirming they are linked to the exempt transaction and thus not recoverable.
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