The UK Supreme Court’s 2025 decision in HMRC v Hotel La Tour Ltd clarified that input VAT on professional fees linked to a share sale is irrecoverable because the costs are directly tied to an exempt supply. The ruling confirms that the direct and immediate link test applies to share sales and that being part of a VAT group does not allow recovery of such fees. The judgment underscores the need for careful documentation to distinguish between exempt and out‑of‑scope transactions.
The Court held that input VAT on professional fees incurred for the share sale was irrecoverable because the fees were directly and immediately linked to an exempt supply.
The Court confirmed that the direct and immediate link test applies to share sales, meaning costs directly attributable to the exempt share sale cannot be recovered as input VAT.
No; the Court ruled that being part of a VAT group does not allow recovery of professional fees incurred for an exempt transaction.
Input VAT on exempt supplies is irrecoverable, whereas input VAT on out‑of‑scope supplies may still be recoverable as part of general overheads.
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