The UK Supreme Court confirmed that VAT incurred on adviser fees related to an exempt share sale is not recoverable, applying a strict two‑stage test that requires a direct and immediate link to the transaction. The ruling rejects the modified approach that allowed recovery based on intended use of proceeds and clarifies that VAT grouping does not alter the nature of a share sale. Businesses must conduct early VAT analysis for share disposals to account for irrecoverable adviser fees.
It ruled that such VAT is not recoverable because the adviser fees have a direct and immediate link to the exempt share sale, as confirmed on 26 January 2026.
A strict two‑stage test: first, assess whether the costs have a direct and immediate link to the specific transaction; if not, consider whether they relate to the taxpayer’s general economic activity.
No, the Court rejected the modified approach that allowed recovery based on the intended use of the proceeds, stating that the link to the transaction itself is decisive.
Businesses must conduct early VAT analysis and factor in that adviser fees linked to share sales will likely be irrecoverable, impacting transaction pricing and planning.
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